El Salvador Passes Law Allowing Investment Banks to Hold Bitcoin, Targets Institutional Clients

El Salvador’s legislative assembly has approved a new law enabling large, well-capitalized financial institutions to apply for licenses to offer bitcoin- and digital asset-based services to “sophisticated investors.” The move marks a significant pivot in the country’s crypto strategy, from retail adoption to institutional investment.

Under the law, only financial institutions with at least $50 million in capital can qualify as investment banks. These institutions will be able to layer crypto service licenses, such as Bitcoin Service Provider, Digital Asset Service Provider, or Digital Asset Issuer, on top of their existing bank licenses. Clients holding more than $250,000 in liquid assets, including BTC, can avail the services.

The framework lets qualified institutions hold bitcoin, issue tokens, and structure crypto-linked deals without creating an entirely new regulatory category. According to Representative Dania González, the reform “expands the institutional architecture of the Salvadoran financial system” in a way that complements the traditional banking sector.

Furthermore, the law reflects a strategic shift. In 2021, El Salvador became the first country to make bitcoin legal tender, mandating its acceptance by businesses. However, adoption rates remained low, with only 1% of remittances and 20% of citizens reportedly using crypto. In early 2025, the government rolled back public-sector bitcoin initiatives to secure a $1.4 billion IMF loan.

As part of the loan agreement, El Salvador committed not to make further public bitcoin purchases. Despite ongoing public claims by the Bitcoin Office of “buying 1 BTC per day,” the IMF noted that these transactions merely consolidated holdings from various government wallets into a central reserve.

By shifting focus to regulated institutional offerings, the government aims to attract larger capital flows. And it is all while maintaining compliance with international agreements. This positions El Salvador’s banking sector as a gateway for institutional digital asset investment in Latin America.

Editorial Note: This news article has been written with assistance from AI. Edited & fact-checked by the Editorial Team.

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