EL SALVADOR Trends and Developments Contributed by: Héctor Torres, Annette Herrera and Daniel Leiva, Torres Legal
Conclusion: a new standard for Latin American capital markets The LP/GP model fulfilled an important historical role, but it was designed for a pre-digital world with low transparency and limited regulatory supervision. Its strength was always flexibility. Its weakness is struc- tural: it is not a financial entity. It is a contract. Tokenisation, integrated into El Salvador’s legal frame- work, converts private funds into authorised vehicles that are transparent, digitally traceable, robustly auditable, fiscally neutral without offshore stigma, and operationally efficient without artificial layers or nominal residencies. In an environment where capital requires clarity, traceability, governance, reputation and efficiency, tokenised funds represent the natural evolution of private capital. El Salvador does not replace Cayman or Luxembourg. It surpasses them in the dimension that matters most today: the integration of legality, governance, fiscal efficiency, compliance and technology within a single coherent framework. What was previously a rigid map (onshore institutional formality or offshore efficiency) now has a third space: El Salvador as a post-offshore jurisdiction, designed for sophisticated, multi-country, technologically auditable private capital. A tokenised fund is not a document kept in a drawer. It is a financial vehicle with formal existence, traceability and enforceable rules, built for the century in which finance actually operates.
In concrete terms, a fund manager can establish: • a Salvadoran holding company that channels inter- national returns without local taxation; • a subordinate or autonomous PAIF that administers fiduciary governance; • a SICAF that constitutes the fund’s patrimony; • a tokenisation layer under the LEAD that records economic rights, audit trails and traceability; and • a relationship with a regulated Salvadoran bank with low AML sensitivity. Each element is real, each element is supervised, and each element is interoperable with the others. The manager can operate with genuine substance, raise private and institutional capital, tokenise RWA, and distribute global returns without resorting to juris- dictional bridges, unnecessary intermediate layers, or structures that are increasingly incompatible with the post-BEPS and Global Minimum Tax environment. No offshore structures. No fictional substance. No nominal directors. Just regulated infrastructure for real capital.
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