The central depository financial institution of El Salvador, Banco Central de Reserva (BCR), has published draft regulations on how banks should handle Bitcoin.

Two documents were released for consultation on Aug. 17 instructing banks and financial institutions how to offering Bitcoin-related services to their customers.

The first, titled "Guidelines for the Dominance of Performance of the Digital Wallet Platform for Bitcoin and Dollars" (in Castilian), defines BTC as legal tender co-ordinate to the recently drafted Bitcoin Constabulary which was passed by El Salvador'southward legislature on June 9 and will run into the country formally adopt the digital asset on September 7.

The second document titled "Technical Standards to Facilitate the Application of the Bitcoin Law" is a longer and more detailed version of the outset document.

Financial entities must utilize to the key bank to offer digital wallets, the guidelines stated. Applications must item the type of product beingness offered, and include target market details, hazard assessments, charges to customers, education provisions for customers, and complaint procedures.

Know-your-client (KYC) verification will be required for all customers though it was unclear whether the national ID card, which is used for bones bank accounts, would suffice for a crypto wallet. Full anti-coin laundering (AML) procedures such as transaction monitoring and analysis would too be applied.

Two-way Bitcoin-to-dollar convertibility must be provided and the bank is allowed to charge a fee. According to a translation hosted by Set on of the fifty Human foot Blockchain author David Gerard:

"The electronic platform used by the digital wallet administrators must allow the Cardinal Depository financial institution admission in existent fourth dimension to all information related to the operations carried out, as well as data requested by clients."

All Bitcoin held by banks and companies must be fully backed every bit opposed to a fractional reserve. Dollars will exist held at the central bank while BTC is held with a custodian, services for which tin be contracted out.

Related: What is really behind El salvador's 'Bitcoin Law'? Experts answer

Article 29 of the second certificate requires the bank or financial institution to warn customers that Bitcoin is volatile, transactions cannot be reversed, and that if they lose their individual keys, then they lose the BTC.

There were no provisions for accounting standards or standard government exchange rates for converting Bitcoin into fiat and vice versa.

On August 16, American credit rating bureau Fitch Ratings stated that the BTC adoption plan will likely be a credit negative for local insurance companies due to volatility and gamble concerns.