On August 31st, 2021, with 64 votes the Congress approved the Law regarding the Creation of the Bitcoin Trust (“FIDEBITCOIN”), by means of which a trust is constituted in the Development Bank of the Republic of El Salvador (“BANDESAL”), to benefit the users of the National Wallet, represented by the Republic of El Salvador, whose purpose will be to support the alternatives for bitcoin convertibility provided by the Salvadoran Government. The parties participating in the Trust are:
- Settlor: Republic of El Salvador (“MINEC”)
- Trustee: BANDESAL
- Beneficiary: Republic of El Salvador (Wallet users)
The trust assets will be:
- US$ 150,000,000.00
- Funds raised by the issuing of securities
- Interest from investments
- Operational profits or losses
The Law states the possibility of an administrative agent, which would be a different public entity that will administrate and manage the use of the assets, according to the instruction of the Settlor. Additionally, it authorizes the Ministry of Finance (“MH”) to transfer the initial resources of $ 150,000,000.00 to BANDESAL that may be increased by its operation (profits). This enables to increase the Trust assets, with its profits, without an amendment to the FIDEBITCOIN.
The Trust will be able to:
- “carry out fundraising operations”.
- Issuance of Securities.
The Settlor must keep the funds in a deposit account in dollars at the Central Reserve Bank ( “BCR”). The Trust will have a Board of Trustee for a 5 years term composed by 1 delegate from the following institutions: MH, MINEC, Secretary of Commerce and Investments, BANDESAL (without voting rights). The relevant functions of the Board will be:
- Authorize the payment of any service provider necessary for its operations.
- Approve the optimal mechanisms to settle the exchange costs from BTC to USD and vice versa.
- Approve financial, operational, and investment regulations.
- Authorize any agreement.
- Approve the fundraising policy.
- Approve the Annual Expense Plan:
o Operating Costs and Expenses.
o Extraordinary expenses caused by volatility.
The Trustee will be responsible for the money transferred by the MH, any other asset of the Trust, and those responsibilities established by the Bitcoin Law. Additionally, it will have the following main obligations:
- Create the financial, operational and investment policy.
- Open accounts, execute agreements with the BCR and any other public or private entity, either national or foreign.
- Invest the profits of the Trust according with the instructions of the Board of Trustees.
- Execute and delivered any agreement authorized by the Board of Trustees.
- Allocate the resources to fulfill the purposes of the Trust.
- Any other resolution from the Board of Trustees.
BANDESAL, the administrative agent, MH or MINEC, will establish the operation of the Trust as follows:
- Physical and technological infrastructure facilities to perform necessary for exchange transactions.
- Any other essential operation.
- The acquisition of goods and services mentioned above must comply with a minimum criteria such as: governance and risk management, AML prevention, prevention and proliferation of weapons of mass destruction, among others.
- MH can transfer the money for the incentives (US$ 30) in any way.
- Transparency: all operating regulations will be published on the BANDESAL website.
- All services to be contracted are excluded from the application of the Law for Public Procurement and State Contracting.
The FIDEBITCOIN must be sent to the Executive Branch to be vetoed, sanctioned, or observed. Due to the current situation between the Legislative and Executive Branch, it is highly probable it will be sanctioned and published in the Official Gazette. Once the Law is published, it will become effective within 8 days after its publication.