EL SALVADOR Law and Practice Contributed by: Héctor Torres, Annette Herrera and Daniel Leiva, Torres Legal
6.2.2 Stablecoin Regulation Fiat-backed stablecoins are regulated in El Salvador under the LEAD and CNAD’s Regulation on the Issu- ance of Public Offerings of Stable Currencies. This creates a specific regime for stablecoin offerings, separate from the ordinary payments framework. El Salvador has adopted a bespoke digital asset framework rather than simply retrofitting stablecoins into pre-existing payment services regulation. A sta- blecoin issuer must comply with the LEAD, the sta- blecoin offering regulation and, where applicable, the general rules for issuers and public or private offer- ings. In practice, the regime focuses on three main areas: • authorisation and registration requirements, includ- ing CNAD review, use of authorised participants where applicable, and involvement of a registered certifier; • disclosure and documentation obligations, includ- ing the RID, reference asset, backing mechanism, custody or reserve arrangements, redemption mechanics and risk factors; and • operational and ongoing obligations, including reporting, AML/CFT controls, use of authorised DASPs for placement or commercialisation, and user protection measures. This differs from the traditional payments framework, which is centred on payment systems, settlement infrastructure and financial institutions supervised by the BCR and SSF. Stablecoin regulation is instead led by CNAD and designed for digital asset issuance and trading. However, BCR or SSF considerations may still be relevant where a stablecoin project connects with banking infrastructure, fiat settlement, payment rails or regulated financial institutions. Unlike MiCA, the Salvadoran framework does not cre- ate separate categories equivalent to e-money tokens and asset-referenced tokens. Instead, fiat-backed stablecoins are generally regulated within a unified stable currency category under the LEAD and CNAD’s stablecoin offering regulation.
6.2.3 Backing Assets Fiat-backed stablecoins are subject to specific requirements under the LEAD and CNAD’s Regula- tion on the Issuance of Public Offerings of Stable Cur- rencies. The framework requires issuers to evidence that the stablecoin is supported by identifiable back- ing assets sufficient to maintain the reference value of the token. The offering documentation should describe the ref- erence asset, the composition of reserves, custody arrangements, redemption mechanics, valuation methodology, risks and reporting obligations. The focus of the regime is on transparency, sufficiency, segregation, verifiability and CNAD review. The regulation does not appear to impose a require- ment that backing assets be held in El Salvador, pro- vided the structure is adequately disclosed and the issuer can demonstrate that the assets are available to support redemption and price stability. Where assets are held with financial institutions or custodians out- side El Salvador, the issuer should expect additional scrutiny on legal enforceability, access to reserves, custody arrangements, jurisdictional risk and report- ing. The composition of backing assets must be consist- ent with the nature of the stablecoin and the repre- sentations made to token holders. For fiat-backed stablecoins, this would generally require cash, cash equivalents or other liquid assets linked to the ref - erence currency, subject to CNAD review and the approved issuance documentation. Payment of interest or yield to stablecoin holders is not generally treated as a standard feature of a fiat- backed stablecoin. As noted in 6.2.1 Fiat Currency and Algorithmic Stablecoins , if a stablecoin includes yield, interest or other economic return, CNAD may conduct a case-by-case analysis to determine wheth- er the product remains a stable currency or should be characterised differently under the LEAD framework. 6.2.4 Special Considerations El Salvador does not currently have a separate sys- temic risk regime for stablecoins equivalent to the “significant stablecoin” or “systemically important
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