EL SALVADOR Law and Practice Contributed by: Héctor Torres, Annette Herrera and Daniel Leiva, Torres Legal
cial infrastructure, including through payment and settlement channels connected to the Banco Central de Reserva , such as the 365 system. This reflects a broader institutional trend: digital asset firms that comply with applicable regulatory, operational and compliance standards are increasingly being treated as legitimate participants within the Salvadoran finan- cial ecosystem. Therefore, while each bank retains discretion based on its own risk appetite and correspondent banking policies, there is no general legal restriction preventing digital asset firms from obtaining banking services in El Salvador. On the contrary, the direction of the mar- ket shows that properly regulated and well-compliant DASPs can access banking relationships and, increas- ingly, connect with broader payment infrastructure. 1.2.3 ESG/Sustainable Finance El Salvador does not currently have a formal ESG or sustainable finance regulatory framework applicable specifically to digital assets. There are no mandatory ESG disclosure or reporting requirements for digital asset issuers or DASPs under the LEAD or other sec- tor-specific regulation. However, the absence of a dedicated ESG regime does not mean that ESG considerations are irrelevant to the Salvadoran digital assets market. On the con- trary, the country’s digital asset framework provides a flexible legal environment through which sustaina- bility-oriented projects may be structured, including tokenised green finance, renewable energy projects, RWA tokenisation, financial inclusion initiatives, trans- parent impact investment structures and blockchain- based traceability models. In practice, ESG matters are mainly addressed through voluntary standards, investor requirements, contractual disclosures and reputational considera- tions. Issuers may choose to align with international frameworks such as TCFD, GRI or other sustainabil- ity reporting standards, particularly where the project targets international investors, institutional capital or environmentally sensitive assets. The regulatory approach in El Salvador is therefore based not on imposing ESG obligations specifically
on the crypto industry, but rather on allowing digital asset structures to be used as tools for sustainable finance and transparent capital formation. This cre- ates an opportunity for issuers to incorporate ESG commitments directly into their offering documents, use-of-funds provisions, reporting obligations, smart contract mechanics or governance models. Bitcoin mining and energy consumption have not trig- gered specific environmental regulation in El Salva- dor. However, the country’s use of renewable energy sources, including geothermal energy, has been pre- sented as part of a broader sustainability narrative for the sector. Accordingly, while ESG regulation for digital assets remains undeveloped from a mandatory compliance perspective, El Salvador offers a coherent and innova- tion-friendly legal framework that may support ESG- aligned digital asset projects with global relevance. 1.2.4 Tax El Salvador’s tax treatment of digital assets should be analysed through three complementary layers: • the Bitcoin Law; • the Digital Assets Issuance Law; and • the general territorial income tax regime. First, the Bitcoin Law contains a specific tax rule for Bitcoin, under which exchanges in Bitcoin are not subject to capital gains tax. This rule is independ- ent from the LEAD framework and should be distin- guished from the tax treatment of other digital assets. However, ordinary commercial income generated by a business, even if paid in Bitcoin, may still require accounting recognition in US dollars and analysis under the ordinary income tax rules. Second, one of El Salvador’s most significant com- petitive advantages as a digital asset jurisdiction is the favourable tax regime created under Article 36 of the LEAD. This regime provides broad tax exemptions for participants in the regulated digital asset ecosystem, including issuers, registered DASPs, certifiers and token holders, when the relevant activity falls within the scope of the LEAD.
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