Publication of the draft El Salvador Bitcoin Banking Regulation

The central financial institution of El Salvador, Banco Central de Reserva (BCR), has printed draft rules on how banks ought to cope with Bitcoin.

On August 17, two paperwork had been launched for session instructing banks and monetary establishments on the way to supply Bitcoin-related providers to their prospects.

The first, entitled “Digital Wallet Platform Licensing Guidelines for Bitcoin and Dollars” (in Spanish) defines BTC as authorized tender beneath the just lately drafted Bitcoin Act. It was on the ninth fortune on September seventh.

The second doc, entitled “Technical Standards to Facilitate the Application of Bitcoin Law”, is an extended and extra detailed model of the first doc.

Financial establishments should register with the central financial institution so as to have the ability to supply digital wallets, the tips say. The utility ought to element the kind of product being supplied and embody data on the goal market, threat evaluation, charges for purchasers, coaching circumstances for purchasers and criticism procedures.

Verify your Customer (KYC) is required for all prospects, though it’s unclear whether or not a nationwide ID card used for easy financial institution accounts is adequate for a crypto pockets. Appropriate anti cash laundering (AML) procedures similar to transaction monitoring and evaluation are additionally put in place.

The bidirectional conversion of bitcoin to {dollars} should be offered and the financial institution is permitted to cost a charge. According to a translation by the creator of Attack of the 50 Foot Blockchain, David Gerard:

“The electronic platform used by digital wallet administrators must allow the central bank to have real-time access to all information related to the activities being carried out, as well as to information requested by customers.”

All bitcoins held by banks and firms should be absolutely coated, no partial reserves. Dollars are held with the central financial institution, whereas BTC is held with a custodian, providers will be contractually agreed.

Related: What is de facto behind El Salvador’s “Bitcoin Law”? Experts reply

According to Article 29 of the second doc, a financial institution or monetary establishment should warn prospects that Bitcoin is unstable, transactions can’t be reversed and that in the event that they lose their private key, they’ll lose their BTC.

There aren’t any accounting requirements or authorities customary alternate charges for changing bitcoins into fiat currencies and vice versa.

On August 16, US ranking company Fitch Ratings introduced that the BTC rollout plan is prone to current a unfavourable credit standing for native insurers resulting from threat issues and volatility.