EL SALVADOR Law and Practice Contributed by: Héctor Torres, Annette Herrera and Daniel Leiva, Torres Legal
organisation (SRO) or formal trade association equiva- lent to those found in more mature markets. However, several initiatives merit mention. The Bitcoin Beach community and its successor organisations have played a significant role in pro- moting grassroots Bitcoin adoption, particularly in the coastal region of El Zonte and surrounding are- as. These organisations have contributed to public education and adoption, though they do not perform regulatory or SRO functions. Within the broader Central American region, the Cámara Cripto El Salvador has begun to organise industry participants, but its institutional development remains at an early stage. As the competent authority, CNAD has become the de facto primary interlocutor for the industry, and occa- sionally convenes working groups with registered issuers and DASPs to discuss regulatory develop- ments, fulfilling some of the co-ordination functions that an SRO might otherwise perform. 1.2 Crypto-Assets 1.2.1 Property Considerations Treatment of Crypto-Assets as Property The LEAD does not expressly characterise digital assets as a form of property under civil law, but it confers ownership-like rights on token holders, recog- nising the transfer, pledge and encumbrance of digi- tal assets as legally valid operations. By analogy with movable property ( bienes muebles ), and consistent with the treatment adopted by courts and regulators in comparable jurisdictions, digital assets in El Salvador are broadly treated as a form of intangible movable property for most practical legal purposes. Bitcoin, with a specific law, occupies a distinct legal category: it is currency recognised by law, and its treatment follows the monetary law regime rather than a property law regime. For other digital assets issued under the LEAD, ownership is determined by refer- ence to the blockchain record of the relevant token. Transfer of Ownership Under the LEAD framework, the transfer of ownership of a digital asset is determined by the execution of
the relevant transaction on the applicable blockchain or distributed ledger. The date, time and counterpar- ties of the transfer are evidenced by the blockchain record. For regulated public offerings, CNAD’s regis- tration system and the records of authorised custodi- ans provide additional layers of evidence. Digital Assets in Collateral Arrangements The use of digital assets as collateral is legally per- missible in El Salvador, and the LEAD provides that digital assets may be pledged ( dados en garantía ). However, the practical implementation of collateral arrangements raises issues relating to the perfec- tion of security interests, priority between compet- ing creditors, and enforcement mechanics. The Law of Movable Property Guarantees ( Ley de Garantías Mobiliarias ) may apply by analogy to create a security interest over digital assets, but there is no specific reg- istry or perfection mechanism for digital asset pledg- es at present. Parties typically address this through contractual arrangements providing for the transfer of custody of the pledged assets to the secured party or Digital asset service providers in El Salvador may access banking services if they are able to satisfy the relevant KYC, AML/CFT, corporate, tax and source- of-funds requirements of each financial institution. In practice, banking access is not prohibited for crypto-related businesses. The key issue is not the nature of the digital asset activity itself, but whether the relevant entity can demonstrate a clear owner- ship structure, regulated status, adequate compliance controls, transparent transaction flows and a risk pro- file acceptable to the bank. The LEAD and the CNAD authorisation regime have strengthened the position of regulated DASPs, which operate under a formal supervisory framework and are subject to AML/CFT obligations. This regulatory sta- tus provides banks with greater comfort when assess- ing onboarding and ongoing monitoring. to a regulated custodian. 1.2.2 Access to Banking The evolution of banking access for the digital asset industry in El Salvador is not limited to traditional account opening. Regulated DASPs are also begin- ning to integrate more directly with the national finan-
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