EL SALVADOR Trends and Developments Contributed by: Héctor Torres, Annette Herrera and Daniel Leiva, Torres Legal
Both operate under a defined prudential framework supervised by the Superintendencia del Sistema Financiero . A subordinate PAIF allows fund managers to launch vehicles quickly, with professional fiduciary adminis- tration, centralised back office, custody, audit, AML onboarding and a structure ready to scale across multiple strategies, including private credit, securi- tised real estate, regional venture capital or alternative financing. An autonomous PAIF, by contrast, is a sov- ereign vehicle that can govern itself with real admin- istration, an independent track record and clear rules, without requiring a mandatory external management company. The law expressly recognises that an autonomous PAIF can be structured through a Sociedad de Inversión de Capital Fijo (SICAF), which constitutes the fund’s patrimony and maintains the separation between administration and investors. This architec- ture enables international family offices, fund manag- ers and institutional investors to operate with genuine fiduciary governance within a regulated vehicle, with asset segregation, custody and traceability – without resorting to nominal directors or artificial economic substance. Integrated tokenisation of fund interests What makes El Salvador’s architecture genuinely dis- tinctive is the integration between the LEAD’s tokeni- sation framework and the PAIF regime. A PAIF or SICAF can use the LEAD to tokenise its participation units, distributing investor rights in digital form within a formally authorised and supervised structure. The tokenisation does not alter the legal nature of the fund interest; it modernises the legal and operational layer through which those interests are issued, held and exercised. This integration means that a tokenised Salvadoran fund is simultaneously a regulated fund vehicle (super- vised by the SSF and BCR under the PAIF law) and a digital asset issuer (registered with and supervised by CNAD under the LEAD). The investor holds a for- mally issued digital token that represents a legally enforceable economic right within a regulated fund structure, with on-chain traceability, automated dis-
tribution mechanics and auditable governance – all within a single coherent legal framework. Real-world asset tokenisation: where law, finance and technology converge Beyond the fund structure itself, El Salvador has posi- tioned itself as a leading jurisdiction for the tokenisa- tion of real-world assets (RWA): real estate, receiva- bles, infrastructure cash flows, royalties and other tangible or intangible assets converted into formally regulated digital instruments. This is not merely a technical capability. It is a paradigm shift in how value is created, represented, transferred and unlocked. Every successful RWA tokenisation begins with legal architecture. The nature of the underlying asset must be determined (equity, debt, income stream, intellec- tual property, real estate), and the rights and obliga- tions of token holders must be defined with precision. The LEAD requires that the DIR clearly describes the legal mechanism connecting the token holder to the underlying asset or cash flow, whether through owner- ship of a special purpose vehicle, a contractual receiv- able or a pledge over the asset. The clarity and robust- ness of this legal link are critical to investor protection and regulatory compliance. Tokenisation becomes powerful when paired with financial creativity. With tokens, it becomes possible to fractionalise, prioritise and repackage exposure efficiently and transparently. Structures can include securitisation of cash flows, tranching of risk through junior and senior token models, built-in interest or revenue distribution mechanics, and embedded con- vertibility features. Each structure must make financial sense, balancing investor expectations, project capi- tal needs, currency risks, tax impact and long-term sustainability. Technology provides the rails. Smart contracts auto- mate the enforcement of rights, the execution of transfers and the distribution of returns. They require the review of audit reports, the co-ordination of token minting processes, and verification that transfer restrictions and compliance checks are embedded in code. This is where legal logic and software logic con- verge – and the bridge between law and code must be precise. A smart contract that does not accurately
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