EL SALVADOR Trends and Developments Contributed by: Héctor Torres, Annette Herrera and Daniel Leiva, Torres Legal
reflect the legal agreement it is meant to execute is not an asset; it is a liability. El Salvador’s competitive advantages for RWA tokenisation El Salvador offers a combination of advantages for RWA tokenisation that few jurisdictions can match simultaneously. • A bespoke regulatory framework: the LEAD was designed specifically for digital asset issuances, not retrofitted from traditional securities law. This means the categories, registration require- ments and disclosure standards are calibrated for tokenised instruments rather than adapted from a framework built for a different era. • Tax efficiency without offshore stigma: Article 36 of the LEAS provides comprehensive tax exemptions for registered issuers, digital asset service provid- ers, certifiers and token holders within the regulat- ed ecosystem, including exemptions from income tax, VAT and municipal taxes on digital asset trans- actions. This creates a structurally advantageous environment for tokenised offerings without relying on offshore secrecy or aggressive tax planning. • Independent regulatory oversight: CNAD reviews and approves each issuance before it reaches the market, provides ongoing supervision, and main- tains public registries of authorised participants. This institutional framework gives international investors confidence that Salvadoran-regulated offerings meet defined standards of disclosure and compliance. • Cross-border distribution capability: the LEAD’s framework is designed with international capital flows in mind. A Singaporean investor, a European family office or a North American institutional fund can access a Salvadoran-regulated RWA token within a legal framework that they can evaluate, audit and rely upon. El Salvador in the international competitive landscape The traditional choice for international fund managers was binary: offshore efficiency or onshore institutional formality. Cayman and BVI offered neutrality and sim- plicity for private capital. Luxembourg and the Isle of
Man offered institutionality, but at high cost. Delaware served domestic US vehicles. That map has changed. El Salvador now occupies a distinct position: defensi- ble fiscal efficiency without offshore stigma, regulated fiduciary vehicles through the PAIF framework, super- vised banking infrastructure, integrated tokenisation, and an absence of artificial substance requirements. Banks accept Salvadoran structures because the country is not a tax haven. Auditors understand the framework because the territorial tax principle is clear and well established. Institutional investors engage with Salvadoran vehicles because fund governance is supervised and verifiable. Luxembourg will remain the premier jurisdiction for sovereign or large-scale institutional vehicles with global distribution requirements, and Cayman will continue to serve specific strategies where its infra- structure advantages outweigh its growing banking friction. But for middle-market operations, regional securitisation, real estate fractionalisation, private debt, venture capital and multipurpose cross-border structures, El Salvador fills a competitive space that no single jurisdiction previously occupied: flexible fiduciary architecture combined with defensible fis- cal neutrality, digital traceability, low AML friction and reasonable costs. What El Salvador offers is not optimisation. It is inte- gration: a system where legal efficiency is a conse- quence of clear rules rather than opacity, where fiscal neutrality is structural rather than exceptional, and where digital infrastructure is part of the regulatory For the first time, a Latin American jurisdiction offers a complete, regulated and operational architecture for structuring private capital without dependence on classic offshore vehicles. Within a single legal framework, El Salvador permits the construction of a corporate and financial chain that integrates territo- rial holding structures, fiduciary investment vehicles, autonomous patrimonial entities, auditable tokenisa- tion and regulated banking with low AML friction. framework rather than an afterthought. The integrated ecosystem in practice
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