The Banco Central de Reserva (BCR), the central bank of El Salvador, has published draft regulations for banks and other financial institutions that want to offer Bitcoin-related services.
Draft regulation for Bitcoin digital wallet services
The BCR Approved the document entitled “Guidelines for Authorizing the Operation of the Digital Wallet Platforms for Bitcoin and Dollar” on Tuesday (August 17, 2021). A second draft with the title “Technical standards to facilitate the application of the Bitcoin Law”, which is a longer version of the first document has also been released for consultation.
According to the documents, the guidelines apply to banks, credit unions, savings banks and credit unions that want to offer digital wallet services for Bitcoin and dollars. The draft regulation stipulates that these financial institutions must obtain approval from the central bank in order to provide such services.
The BCR goes on to list what applicants must submit in order to obtain approval from the central bank. Some of them include the company’s business model and the costs that customers will incur in using the digital wallet service.
Applicants are also expected to submit risk management methods that include such risks as terrorist financing, money laundering and cybersecurity. In addition, companies must describe in detail how they will educate their customers about the planned products and services and at the same time provide ways to resolve complaints.
In addition, the documents state that applicant institutions must implement anti-money laundering (AML) regulations in line with international regulations. You also need to apply robust know-your-customer (KYC) procedures and create appropriate tools to monitor transactions. In addition, applicants should offer convertibility from Bitcoin to dollars and vice versa for a fee.
In the meantime, the aim is for financial institutions to inform customers about the risks associated with using Bitcoin, such as its volatility. Also, customers should know that transactions are irreversible and they could lose their bitcoin if they lose access to their private keys.
El Salvador’s Bitcoin law is facing criticism
This draft regulation follows that of El Salvador historical legislation Make Bitcoin legal tender as proposed by President Nayib Bukele. While the Bitcoin law is due to go into effect on September 7th, it has met with criticism and opposition.
That IMF (IMF) and the World Bank are not keen on El Salvador’s BTC plans, while the country’s opposition party said the law was not in the interests of the people.
ON opinion poll conducted in July showed that most El Salvadorans were skeptical of the government’s bitcoin law. Even New York-based rating agency Fitch Ratings said BTC is legal tender could be risky for local insurance companies.
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