Banco Central de Reserva (BCR), El Salvador’s central bank, has released draft regulations targeting how Bitcoin (BTC) should be handled by banks. On 17th August, the bank published two documents for consultation directing financial institutions and banks on how to propose the services regarding Bitcoin to their consumers. The first document defines Bitcoin concerning its status as a legal tender rendering the recent Bitcoin law sanctioned by the legislature of the country on 9th June, and the country will adopt BTC on 7th September. The second paper is a more elaborated transcript of the previous document describing the technical standards of incorporating BTC adoption.
According to the instructions in the document, the financial institutions are supposed to submit an application to the country’s central bank for providing digital wallets. The applications must be comprehensive to cover the product type, details of the target market, charges to users, complaint procedures, provision of education for the users, and risk assessment. All the customers will be required to do KYC (know-your-customer) verification; however, it is unknown whether the national identity card would be sufficient for a digital wallet of cryptocurrency. Thorough AMLs (anti-money laundering) procedures like transaction monitoring, as well as analysis, would be implemented as well.
The detailed document further added that two-way exchange of Bitcoin-dollar must be offered, and a bank is permitted to demand a fee from the users for this purpose. In a translation held by David Gerard (the author of Attack of the 50 Foot Blockchain), he stated that the administrators must be granted real-time access by the platform they use to access the central bank to get at the details of the carried out operations along with the customers’ requested information.
Moreover, the document said, All BTC held by companies and banks should be comprehensively supported by a proportional reserve. The central bank will hold dollars, whereas Bitcoin will be held through a custodian, for which the services can be planned. Some warnings are also mentioned in the 29th article of the second document stating that every financial institution or bank should warn their clients about the volatile nature of BTC, the non-reversibility of the transactions, and a loss of BTC in case of the loss of the private key. No specific provisions have been noted concerning the accounting standards or the standard rates for exchanging fiat into BTC as well as vice versa.
