Crypto License in El Salvador

The CNAD is an independent institution under the rule of the Ministry of Economy of El Salvador.

It was created by law as the regulator and national authority for crypto companies in El Salvador, and it oversees the implementation of the Digital Asset Issuance Act.

There are two different types of licenses in El Salvador:

• BTC Service Provider;
• Digital Asset Service Provider.

The BTC Service Provider license is mainly targeted at domestic small businesses willing to offer services related to Bitcoin only. This is relevant to the life of the Salvadoran economy, as Bitcoin is legal tender in the country and Bitcoin transactions are permitted under this license. Bitcoin mining in El Salvador utilises renewable volcanic energy, attracting ESG-focused investors.

The Digital Asset Service Provider license is the main license in El Salvador. It allows for numerous crypto activities, such as:

• Crypto exchange and crypto-fiat exchange;
• Sales of digital assets and digital asset derivatives;
• Custody of digital assets and wallets;
• Promote, structure, and manage all types of investment products in digital assets;
• Operations on behalf of third parties (transfer of digital assets, safeguarding, orders to buy and sell digital assets and derivative digital assets);
• Bitcoin transactions as part of broader crypto activities.

It is also worth mentioning that issuing a token or creating a stablecoin requires a separate registration with the regulator before it is allowed to happen. The scope of the license also covers the regulation of crypto assets under the current legal framework.

In summary, the regulatory environment in El Salvador is designed to support crypto businesses through clear rules and compliance requirements. Crypto licenses, including El Salvador crypto licenses, are essential for legal operation, and obtaining a crypto license ensures that companies can participate in the country’s evolving digital asset ecosystem while remaining compliant with local laws.

Tax benefits for crypto company in El Salvador

Before getting started with any cryptocurrency license in El Salvador, it’s important to acknowledge the tax benefits and conditions of authorised companies.

Digital Assets Services Providers (DASP) are exempt from corporate income tax and from VAT (value-added tax) on activities pertaining to cryptocurrency. This is a very significant advantage for businesses, given that the usual corporate income tax rate in El Salvador, applicable to other industries but not to crypto companies, is 25% corporate income tax on income under 150,000 USD, and 30% on income above that.

Entrepreneurs should keep in mind that the withholding tax (tax applicable to distributing dividends to shareholders of the company) in El Salvador still applies to DASP-licensed companies, at a rate of 20% to 25% for non-resident investors and shareholders.

All in all, the tax benefits provided by El Salvador to its licensed Digital Assets Services Providers are a major advantage for entrepreneurs of the cryptocurrency industry. It allows for a wide margin of operation within one of the most reputable countries for everything related to crypto.

Costs and fees for an El Salvador Crypto License

The fees are based on the minimum monthly salary for the commerce and services sector. The regulations provide the exact U.S. dollar equivalents.

• Initial Registration Fee: The regulations state this is equivalent to 5,475 USD. This fee is paid after receiving a favourable resolution from the CNAD;
• Annual Renewal Fee: Ten minimum monthly salaries, which the regulations state is equivalent to 3,650 USD. This must be paid within the first quarter of each calendar year to maintain the registration;
• Certification Fee: 50 USD (or its equivalent in Bitcoin) for each additional certification of the registration resolution that is requested.

Though there are no official minimum share capital requirements to apply for a DASP or BSP license in El Salvador, the minimum share capital to form a limited company in El Salvador is 2,000 USD, of which 5% must be paid up (= 100 USD).

Compliance and maintenance requirements after securing a Salvador DASP license or Salvador BSP license

Once the crypto company has received its license in El Salvador, it must comply with a certain number of obligations, as described in the laws and regulations of the country.

A Digital Asset Service Provider in El Salvador must imperatively comply with all the following obligations:

• To provide their services with honesty and integrity, as described in the guidelines of good commercial conduct and ethical standards of the CNAD;
• To hold transparent communication with clients, including the provision of true and easily accessible information on their website regarding their services;
• Report the required information and suspicious transactions to the CNAD and respond to their requests;
• Have a customer service;
• Maintain adequate resources, financial and non-financial;
• Protect the digital assets and fiat money of all the clients and parties;
• Prevent price manipulation to maintain market integrity;
• Maintain high standards of cybersecurity;
• Set and maintain systems to prevent, detect, and report financial crimes (AML-CFT);
• Prepare a plan for continuation and cessation of activity;
• Communicate clearly with the regulator on any additional service or digital asset involved in the crypto activity;
• Have computer systems that allow them to extract accurate information and data on all the transactions and activities of the DASP’s clients.

A crypto-licensed company in El Salvador is liable to pay an annual license fee of 3,650 USD. This fee is paid in the first quarter of the calendar year, independent of the registration date of the company.

Common misconceptions about the Bitcoin law and licenses in El Salvador

No, El Salvador isn’t an offshore country. Though DASPs and companies offering Bitcoin-related services (BSP) are benefiting from tax incentives, this is due to pushing forward the industry. Non-crypto companies in El Salvador, even if operated remotely, are subject to the usual taxation of profits.

No, there are no requirements to have at least two shareholders for obtaining a cryptocurrency license in El Salvador. This is widespread misinformation due to a previous version of the regulation. It is important to work with legal partners such as LegalBison who are staying on top of crypto frameworks.

No, a crypto license in El Salvador doesn’t automatically guarantee the opening of a corporate account in a country. Though it helps immensely, the opening of a corporate account in a banking institution still requires proper preparation and meeting with the aforementioned institutions.

What are the texts composing the legal framework of the El Salvador crypto license

El Salvador is famous for its Bitcoin Law of June 2021, which defines Bitcoin as legal tender in the country. This law also laid out the basis for the cryptocurrency regulation pertaining to businesses.

On November 14th of 2022, the Law For The Issuance of Digital Assets (Ley de Emisión de Activos Digitales) was enacted. This regulation provides guidance on how to emit a cryptocurrency within El Salvador and what the requirements are to do so.

On July 11th 2023, a regulation on stablecoin issuance was introduced. This notice gives a set of rules to abide by in order to create and issue a stablecoin. One of the requirements is to have a crypto license in El Salvador.

On August 11th of 2023, the Regulation of Digital Assets Services Providers (Reglamento de Proveedores de Servicios de Activos Digitales) was issued, detailing the requirements and obligations of licensed crypto companies in El Salvador.

It also includes the rules applicable to the topics of anti-money laundering for crypto, customer due diligence, and risk assessment. Additional texts on the matter of AML/CFT are also relevant:

• Anti-Money Laundering and Asset Laundering Law;
• Regulation of the Anti-Money Laundering and Asset Laundering Law;
• Instructions from the El Salvador Financial Intelligence Unit;
• Special Law against Acts of Terrorism.

What are the key advantages of obtaining a Salvador Crypto License

As one of the most stable and growing countries in Latin America and in the whole world, El Salvador has a lot to offer to crypto entrepreneurs and blockchain projects.

• El Salvador is THE crypto country: this is an undisputed fact since the passing of the Bitcoin Law in 2021. The country is growing and expanding fast economically, driven by the crypto market. Crypto businesses operating from El Salvador therefore benefit from the country’s reputation;
• Fast set-up: it can take as few as 7 weeks to be fully operational with a DASP license in El Salvador. This requires very minute preparation, and it is fair to warn entrepreneurs to expect longer delays;
• Incentivising framework: activities that are oftentimes not allowed by crypto licenses are explicitly permitted by the Salvadorian framework. This includes the emission of stablecoins (with the prime example of Tether being registered in this jurisdiction) and the formation of crypto hedge funds;
• Tax benefits for DASPs: one of the main advantages for crypto companies is the availability of tax incentives, including exemptions from capital gains, income, and transfer taxes. A cryptocurrency company licensed in El Salvador can benefit from tax exemption on certain digital asset activities, making the country highly attractive for digital asset service providers;
• No economic substance requirements: the Digital Assets Services Providers license in El Salvador doesn’t require relocation. A physical address and a local Compliance Officer are basically the only domestic requirements for El Salvador crypto companies.

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Limited liability company registration in El Salvador, including submission of corporate documents to the commercial registry, which is the authority responsible for formal company registration and legal validation.

Detailed organisational chart.

Local director or legal representative.

Cybersecurity officer.

Compliance officer.

AML-KYC policies and processes.

Data protection systems.

Detailed business plan, including a description of the applicant’s business model, target markets, and long-term plans.

Description of all the digital assets that the company will work with.

Actual customer support & transparent information to the clients.

Registration as a digital asset services provider in order to provide digital asset services in compliance with local regulations.

The first requirement is to set up a company in El Salvador. The DASP license can only be granted to a Salvadorian legal entity. The company should then provide a detailed organisational structure with a presentation of every participant.

Among the team of the company, there should be at least one person responsible for cybersecurity duties, under the position of Computer Security Officer. Another individual shall be appointed by the company as a Compliance Officer, in order to ensure continuous compliance with the laws and regulations pertaining to cryptocurrency activities in El Salvador.

On the technical and financial levels, the applicant must demonstrate its ability to offer the digital services it intends to provide. In this regard, the applicant must disclose the list of digital assets it plans to work with and a description of each of these cryptocurrencies.

If the crypto project is willing to launch its own coin or token, it should look into the Law on Emitting Digital Assets once it has been licensed, but shall already describe the token and its intended use in the application.

The crypto company is required to have and demonstrate its processes and systems, which:

Provide user support as necessary.

Safeguard the personal information of all parties.

Maintain a program against money laundering and financing of terrorism, following the Salvadorian law and the guidelines of the Financial Action Task Force (FATF).

Finally, the applicant must pay the registration fee of 5,475 USD.