By: Mario Costa
Through the publication of the
Official Gazette number 163 dated August 27 of this year, the Government of El Salvador announced the contents of the “Regulation of the Bitcoin Law”, which aims to develop, facilitate and ensure the application of the referred law, to create a regulatory environment in which individuals and businesses can carry out transactions in bitcoin as legal tender in the country.
One of the main aspects contemplated in the Regulation is the creation of a “Registry of Bitcoin Service Providers”, which will be in charge of the Central Reserve Bank of the Republic of El Salvador (BCR).
According to the Regulation, a “Bitcoin Service Provider” shall be understood as an individual or legal entity that provides bitcoin-related services for itself or third parties, such as, but not limited to: custodians, exchange houses or “Exchanges” and payment processors or wallets. It is very important to highlight that excluded from the definition of
“Bitcoin Service Provider” are those persons who use bitcoin for their use, including economic agents who carry out transactions in bitcoin only as a means of payment in connection with the purchase and sale of their goods and services. Further excluded from this definition are technology providers who do not keep custody of bitcoin or the private codes of their customers.
Likewise, said Regulation provides that Bitcoin Service Providers, before performing operations, must submit to the BCR, within 20 working days after the entry into force of the Regulation, the documentation required in its provisions.
Among other obligations imposed by the Regulation to the Service Providers are the following: Maintain an anti-money laundering program that complies with the Anti-Money Laundering Law and international best practices articulated by the FATF; maintain books and records that accurately reflect the Bitcoin Service Provider’s assets, liabilities, and net worth and customer account records; maintain a register of complaints; maintain a cybersecurity program tailored to the nature of the services offered by the Bitcoin Service Provider; transaction limits policy, etc.
On the other hand, it is worth mentioning that in the case of digital bitcoin wallets offered by the State, to guarantee the financial inclusion of the population, Banks must provide their services as exchange platforms in such a way that they do not generate commission for the end-user of such wallets, following the regulations issued by the BCR for such purpose.
The Superintendence of the Financial System will have all the powers of supervision and regulation of the regulated entities of the Bitcoin Law and may impose sanctions against a Bitcoin Service Provider if it does not comply with the provisions of the Regulation or with the standards of conduct regulated therein under the Law of Supervision and Regulation of the Financial System and other provisions.
The Regulation will become effective next Wednesday, September 8, 2021.
If you have any questions or need further information, please contact us:
Michelle Sutter- Regional Corporate Director
msutter@latinalliance.co
Mario Costa- Head of Corporate El Salvador
mcosta@latinalliance.co
or call us at +503 2263-6366.