Majority of Bitcoin Service Providers Fail to Meet Legal Standards
Only 20 out of 181 Bitcoin service providers registered with El Salvador’s central bank are currently operational, according to newly released data from the Central Reserve Bank of El Salvador. This means that just 11% of all registered providers have successfully complied with the nation’s Bitcoin Law, which mandates strict financial and cybersecurity requirements.
The remaining 89% of firms are categorised as non-operational, with at least 22 of them failing to meet even the most basic standards set by the legislation. These include implementing Anti-Money Laundering (AML) programmes, maintaining accurate records of company finances, and developing cybersecurity measures tailored to their services.
Legal Requirements Prove Challenging
El Salvador’s Bitcoin Law, introduced in 2021, requires all cryptocurrency service providers to uphold a series of financial safeguards. These include robust AML systems, detailed asset and liability records, and company-specific cybersecurity protocols. However, the overwhelming majority of firms have not been able to meet these obligations, raising concerns about the country’s regulatory enforcement and the preparedness of its crypto sector.
Among the few compliant companies are the state-supported Chivo Wallet and private firms such as Crypto Trading & Investment and Fintech Américas, which have been recognized for meeting the required legal criteria.
Bitcoin’s Legal Status Faces Uncertainty
El Salvador became the first country in the world to adopt Bitcoin as legal tender alongside the US dollar in 2021, marking a bold economic move by President Nayib Bukele. The policy was a cornerstone of Bukele’s broader financial strategy, aimed at attracting crypto investment and enhancing financial inclusion.
However, the future of this experiment appears uncertain. In a recent agreement with the International Monetary Fund (IMF) over a $1.4 billion loan, El Salvador committed to scaling back some of its Bitcoin-related initiatives. As part of the deal, taxes are to be paid exclusively in US dollars, and public institutions are expected to limit their use of Bitcoin.
IMF Pushback and Government Defiance
On 3 March, the IMF formally requested that El Salvador stop its public sector Bitcoin purchases. Despite this, President Bukele has declared that the government will continue to buy Bitcoin, suggesting a potential conflict with the terms of the IMF agreement.
This contradiction has fuelled speculation over whether the government will ultimately revoke Bitcoin’s legal tender status. According to John Dennehy, a Bitcoin advocate based in El Salvador, a rollback law is set to take effect on 30 April, potentially altering Bitcoin’s legal standing in the country.
As the deadline approaches, the global crypto community and financial institutions alike are watching closely to see how El Salvador’s unique Bitcoin experiment unfolds.
