EL SALVADOR Law and Practice Contributed by: Héctor Torres, Annette Herrera and Daniel Leiva, Torres Legal
education, market co-ordination and international positioning.
general income tax regime. The UIF, within the Attor- ney General’s Office, is the key authority for AML/CFT reporting, suspicious transaction analysis and guid- ance to obliged entities. The UIF has issued guid- ance for virtual asset service providers and maintains training, registration and reporting tools for AML/CFT compliance. The FGR is relevant where crypto-asset activity involves fraud, money laundering, terrorist financing, market misconduct or other criminal offences. International AML/CFT Alignment El Salvador’s strongest area of international alignment is AML/CFT. The country is a member of the Caribbe- an Financial Action Task Force (CFATF), and its AML/ CFT framework is assessed through this FATF-style regional body. In the digital asset sector, El Salvador has sought to align with FATF standards on virtual assets and virtual asset service providers, including registration, super- vision, customer due diligence, suspicious transaction reporting, risk-based controls and Travel Rule-related expectations. The FATF mutual evaluation materials note that El Salvador has established a supervisory authority for the DASP sector, has created a DASP registry and has been providing feedback to the sec- tor. Securities and Financial Market Standards El Salvador’s alignment with IOSCO is mainly relevant through the SSF and the traditional securities market, rather than directly through CNAD. The SSF is listed as an ordinary member of IOSCO and participates in IOSCO’s Inter-American Regional Committee. However, El Salvador’s digital asset framework is not a copy of IOSCO, MiCA or other international models. The LEAD is a bespoke regime designed to regulate issuers, offerings, DASPs and certifiers under a spe- cialised domestic framework. It incorporates interna- tional principles such as disclosure, supervision, AML/ CFT controls, investor protection and market integ- rity, while preserving distinctive Salvadoran features, including Bitcoin’s separate legal status and the coun- try’s tax incentive architecture.
2. Regulation 2.1 Regulators and International Alignment Specialised Digital Asset Supervision The main regulator for blockchain and crypto-asset businesses in El Salvador is CNAD, which is the spe- cialised authority created under the Digital Assets Issuance Law and is responsible for the registration, supervision and monitoring of digital asset issuers, public and private offerings, DASPs, certifiers and oth- er regulated participants within the LEAD framework. CNAD’s approach has been both supervisory and developmental. It reviews applications, authorises regulated participants, monitors ongoing compliance and engages with market participants in connection with new products, relevant platform changes, stable- coin no-objection requests, new authorised activities and changes to previously approved issuances. Financial System Regulators The SSF remains relevant where blockchain or cryp- to-asset activities intersect with traditional financial institutions, including banks, insurers, pension funds, securities market participants, investment funds and other supervised entities. The SSF’s mandate is to preserve financial system stability, efficiency, trans- parency, safety and soundness, in line with interna- tional best practices. The Central Bank of Reserve of El Salvador (BCR) is relevant for monetary, payment system and financial infrastructure matters. Its role is particularly important where digital asset activities connect with payment systems, settlement rails, liquidity, banking infrastruc- ture or Bitcoin-related payment implementation. The BCR also issues and approves technical norms appli- cable to the financial system, including rules connect- ed to payment systems and financial system stability. Tax, AML and Criminal Enforcement Authorities The Ministry of Finance is relevant for the tax treat- ment of digital assets, including the application of exemptions under the LEAD, the Bitcoin Law and the
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