El Salvador’s Investment Banking Law Opens Banks to Bitcoin
El Salvador’s investment banking law now permits licensed banks to hold Bitcoin and other digital assets on their balance sheets. Under the new regulation, banks can apply for a digital asset service provider (PSAD) licence. PSAD-holders gain approval to manage Bitcoin custody and trading. The country’s crypto regulator, the CNAD, will supervise the rollout. Supporters say the El Salvador investment banking law will attract foreign investment and position the nation as a Latin American crypto hub. Critics warn it may favour large institutions and raise volatility risk for retail traders. By offering professional custody solutions and trading desks, banks aim to boost liquidity and market confidence among accredited investors.
Bullish
The law’s approval marks a clear regulatory move to integrate Bitcoin into institutional banking. In the short term, licensed banks holding BTC should increase demand and trading volume, leading to upward price pressure. Long term, defined custody frameworks and professional services can attract more institutional capital, boost liquidity and reduce market friction. While critics note potential volatility and concentration risk, the overall effect of enhanced credibility and entry of new buyers supports a bullish outlook for BTC.