Crypto License in El Salvador

El Salvador has established itself as a prominent and favorable financial hub for cryptocurrencies, marked by its groundbreaking decision on June 2021, it became the world’s first country to recognize bitcoin as legal tender through the Bitcoin Law. This pioneering move has garnered worldwide interest and investment, positioning the nation as a hub for digital innovation and financial technology. The government’s proactive stance in establishing a regulatory framework for cryptocurrencies has contributed to fostering an appealing environment for blockchain startups and businesses.

 

Advantages of obtaining a license in El Salvador

1. Share capital: The amount of initial share capital is considerably low, compared to other
   jurisdictions.
2. Staff requirements: No local employees are required
3. Regulatory framework: Sustainable legislative framework
4. Banking: Opening bank accounts for cryptocurrency companies comes with challenges in most cases. Nonetheless, in El Salvador, there is a number of crypto friendly banks, willing to offer banking services to cryptocurrency companies, upon meeting specific conditions and AML standards.
5. Tax incentives: These incentives encompass exemptions on the nominal value, profits, and capital gains derived from cryptocurrency transactions. The exemptions also extend to issuers, certifiers, and service providers dealing with registered digital assets, relieving them from both goods and services transfer tax and income tax.

 

Types of Crypto License in El Salvador

1. BTC Service Provider License
   This is required for companies that provide Bitcoin related services only
2. Digital Asset Service Provider
   This is required for companies that provide services related to other cryptocurrencies.

 

Permitted activities

Providers of digital asset services may carry out the following activities:

1. Exchange of digital assets for fiduciary money or equivalent or for other digital assets, either using their own capital or that of a third party
2. Operate a platform for the exchange or commercialization of digital assets or digital asset derivatives
3. Evaluation of risk and price, as well as subscription to digital asset issuances
4. Place digital assets on digital platforms or wallets
5. Promote, structure, and manage all types of investment products in digital assets
6. The following operations when carried out on behalf of and for the benefit of third parties
   1. Transfer digital assets or the means to access or control them, between natural or legal persons or between different acquirers, electronic wallets, or accounts of digital assets
   2. Safeguard, custody or manage digital assets or the means to access or control them
   3. Receive and transmit orders to buy or sell digital assets or negotiate derivative digital assets
   4. Execute orders to buy or sell derivative digital assets

 

Requirements for obtaining a license in El Salvador

For the purposes of forming a legal entity the following are needed:

• Minimum of 2 shareholders (individual or legal entity)
• Passport copies of all shareholders and directors
• Address of residence confirmation from all directors and shareholders
• Share capital of 2000 USD
• Description of the business model of the company

For the purposes of submitting a license application to the National Commission of Digital Assets, the following documents need to be prepared:

• Business plan demonstrating the ability to offer digital asset services
• A list of the digital assets that will be traded
• The company's organizational structure
• A summary of the company’s ability to keep efficient customer service system, corresponding to the nature of the service to be provided
• AML Policy and Policies related to cybersecurity
• Source of Funds
• Technological platform and IT systems
• AML Officer

The Central American country, El Salvador, has been trusted by the industry’s largest exchanges, while the National Commission for Digital Assets granted four new licenses in October 2023.