it became the first country in the world to accept bitcoin as legal tender on June 9, 2021, as stipulated in the Bitcoin Law. This historic decision has attracted global attention and investment, positioning the country as a center for digital innovation and financial technology. The government’s proactive approach to creating a regulatory framework for cryptocurrencies has helped to create an attractive environment for blockchain startups and businesses. In particular, it was a positive step that on January 11, 2023, El Salvador’s Legislative Assembly adopted the Digital Asset Issuance Law (DAI Law) as a significant element of the country’s technological and financial innovation program.
Benefits of obtaining a Crypto License in El Salvador
- Pioneering in the crypto landscape: El Salvador stands as a trailblazer in Latin America by setting up a pioneering regulatory structure for cryptocurrencies.
- Tax incentives: El Salvador extends a host of tax advantages to crypto-related activities. Notably, the nominal value and earnings derived from digital assets are entirely exempt from taxation.
- Facilitating access to banking services: El Salvador has a unique advantage in this regard, as several crypto banks and financial institutions offer banking services to crypto companies on the condition that they comply with certain conditions and regulations, which is rare on a global scale.
- Gateway to a сrypto-friendly market: El Salvador’s groundbreaking move of legitimizing Bitcoin as a legal tender and issuing crypto licenses has paved the way for the crypto industry to flourish, luring new players – crypto exchanges, wallet providers, payment systems.
- Navigating cryptocurrency legislation with confidence: Obtaining a cryptocurrency license allows companies to clearly comply with legal requirements including, for example, know-your-customer (KYC) and anti-money laundering (AML) rules. Compliance with these requirements builds trust with customers and partners, and ensures the safety and transparency of the crypto environment.
Types of crypto licenses in El Salvador
There are two types of crypto licenses in El Salvador:
- Bitcoin Service Provider (BSP) License. The BSP license is required for persons that provide various Bitcoin-related services, such as exchanging Bitcoins for fiat money, making payments in Bitcoins, or storing Bitcoins on behalf of clients. Under the Bitcoin Act, the issuance of a BSP license is handled by the Central Reserve Bank (Banco Central de Reserva; BCR).
The BSP shall maintain:
- an AML program that complies with the AML Law and international best practices formulated by the FATF;
- accounting records that fairly reflect the BSP’s assets, liabilities and net worth, as well as customer account records that reflect the data received from each customer and information related to each transaction requested by the customer;
- a cybersecurity program;
- a policy of transaction limits within its platforms that is consistent with its user due diligence, comprehensive risk management and money laundering and other financial crime prevention programs.
- Digital Asset Service Provider (DASP) License. This license is required for persons that provide a variety of services related to other cryptocurrencies. Under the DAI Law, registration of DASPs is handled by the National Digital Assets Commission (Comisión Nacional De Activos Digitales; CNAD).
Requirements for the DASP:
- Offer and provide digital asset services if it is registered with the CNAD of El Salvador.
- Any natural person must present their Unique Identity Document or residence card and indicate their place of domicile in the country. Any legal entity must present their legal personality. In the case of foreign legal entities domiciled in another country, jurisdiction or territory, they must form a corporation or branch domiciled in El Salvador and duly registered with the the National Registration Center (Centro Nacional De Registros; CNR) and present the legal personality of that company to the CNAD.
- Provide a detailed description of its organizational structure, including but not limited to names, positions, and specific functions.
- Carry out activities with honesty and integrity, according to the guidelines of good commercial conduct and ethical standards established by the CNAD.
- Implement appropriate cybersecurity standards on its platform.
- Manage and control activity effectively, and carry it out with due skill, care and diligence, taking into account the risks to its activity and clients.
- Have systems to prevent, detect and disclose the risks of financial crimes, such as money laundering and terrorist financing.
- Pay a one-time registration fee and then an annual fee for the renewal of the registration during the first quarter of each year, regardless of the initial registration date.
Registration of a crypto company in El Salvador
The most popular legal form of the company is a Limited Liability Company (Sociedad de Responsabilidad Limitada; SRL). The formation of SRL is regulated by the El Salvador Commercial Code (Código de Comercio).
Requirements for the SRL:
- Name: The company name is formed from the name of one or more partners. The name must be different from the name of any existing company. It must have the word “Limitada” or its abbreviation “Ltda”.
- Share capital: The share capital may not be less than 2000 US dollars; 5% of the share capital must be deposited in a corporate account at the time of company incorporation.
- Minimum amount of shareholders: at least two shareholders must be in the company.
Steps for a SRL formation:
- Choosing a company name and registering it with the Commercial Registry of El Salvador.
- Preparation of documents (copies of passports of the board of directors, proof of physical address, etc).
- Submitting an application for registration to the Commercial Registry of El Salvador. Once the application is submitted, it will be reviewed by the competent authorities, and if the company is registered, you will be issued an official Сertificate of registration.
- Opening of a corporate account parallel to the registration. The company needs to contribute at least 5% of the share capital (required share capital is 2000 US dollars).
- Additional registration with the public authorities such as the Ministry of Finance (Ministerio de Hacienda), the Salvadoran Social Security Institute (Instituto Salvadoreño del Seguro Social), and the Ministry of Labor (Ministerio De Trabajo Y Previsión Social).
- Obtaining a Crypto License in El Salvador.
El Salvador’s innovative approach to cryptocurrency regulation and the introduction of the DAI Law have positioned the country as a favorable destination for crypto-related activities. The benefits of obtaining a Crypto License in El Salvador are varied, making it an attractive prospect for entrepreneurs and businesses looking to participate in the digital financial landscape.
Moreover, El Salvador offers two types of crypto licenses – the BSP License and the DASP License, each with its specific requirements and regulatory oversight. Companies interested in registering in El Salvador generally choose a Limited Liability Company (SRL) as their legal structure. There are a few steps for its formation, including registration and opening a corporate account.
The process of obtaining a Crypto License in El Salvador is part of a broader strategy by the government to encourage technological and financial innovation, making the country a promising hub for the evolving world of digital assets.
The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.