EL SALVADOR Law and Practice Contributed by: Héctor Torres, Annette Herrera and Daniel Leiva, Torres Legal
Foreign firms should not rely on reverse solicitation where there has been advertising, local promotion, use of intermediaries, targeted online campaigns, roadshows, local events or platform features aimed at Salvadoran users. Advertising and Marketing Standards El Salvador does not have a dedicated advertising authority for crypto-assets; general consumer protec- tion, commercial advertising, anti-fraud and CNAD disclosure principles apply. Marketing materials for digital assets should therefore be clear, fair and not misleading, and should include appropriate risk dis- closures where the product is offered to Salvadoran investors. In practice, the key test is whether the marketing cre- ates a Salvadoran nexus sufficient to bring the activ- ity within CNAD’s regulatory perimeter. Foreign firms should assess both the regulatory status of the prod- uct and the manner of solicitation before approaching Salvadoran clients. 4.2 White Labelling White-label arrangements may be used in El Salvador, but they do not operate as a general exemption from CNAD registration. A registered DASP may provide infrastructure, technology, operational or regulated services to third parties under a white-label model, provided the arrangement is properly documented and the licensed entity remains responsible for the regulated activities carried out under its licence. However, the licence of an existing DASP cannot be used as a blanket authorisation for all external firms operating through that platform. Each entity partici- pating in the structure must be analysed individually, and may need to undergo its own CNAD registration or approval process where its role involves regulated digital asset services, client onboarding, marketing, custody, exchange, transfer, placement, administra- tion or advisory activities. The registered DASP remains responsible before CNAD for compliance with its regulatory obligations, regardless of any internal contractual allocation of responsibilities with the white-label partner. This includes AML/CFT controls, user protection, opera-
tional resilience, reporting, cybersecurity and other obligations applicable to its authorised activities. In practice, CNAD would likely review the substance of the arrangement rather than its commercial label. The key issues are which entity faces the client, who performs the regulated activity, who controls the user relationship, who handles funds or assets, and who assumes compliance, AML/CFT, technology and operational responsibilities. Accordingly, white-label models are possible, but they must be structured carefully. They should not be treated as a way for unlicensed entities to operate generally in El Salvador under another firm’s licence. DeFi is not expressly prohibited in El Salvador. A pure- ly decentralised product with no identifiable issuer, operator, intermediary, service provider or controlling entity would generally fall outside the direct regulatory scope of the LEAD, as the law mainly regulates digi- tal asset issuances and the provision of digital asset services. However, if there is an entity or person controlling the protocol, promoting the product, managing user access, receiving fees, custodying assets, operating an interface or otherwise acting as an intermediary, the analysis changes. In that case, the activity may fall within CNAD’s regulatory perimeter and require regis- tration as a DASP or compliance with the applicable digital asset issuance rules. 5. Decentralised Finance 5.1 Ability to Use DeFi As CNAD has not yet issued specific guidance on DeFi, this analysis is based on the current scope of the LEAD and may evolve as the regulator develops its supervisory approach to decentralised protocols. CNAD is rigorous in assessing substance over form, so a project will not be treated as unregulated simply because it uses DeFi terminology if, in practice, there is a centralised operator or service provider behind the activity.
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