EL SALVADOR Trends and Developments Contributed by: Héctor Torres, Torres Legal
This legislation also reflects the government’s determination to emulate the success stories of other global tech hubs. Countries like Israel, often cited as a model for tech innovation, have shown the world how fostering a startup cul- ture, creating a favourable legal environment and investing in research and development (R&D) can lead to an explosion of technological advance- ment and economic growth. El Salvador hopes to replicate these strategies to create a thriving tech ecosystem within its borders. However, the country is not just focused on tra- ditional tech industries. The law explicitly recog- nises the growing importance of digital assets, particularly Bitcoin and blockchain technology. In 2021, El Salvador made global headlines by becoming the first nation to adopt Bitcoin as legal tender, setting the stage for the country to become a global leader in cryptocurrency adop- tion and innovation. Bitcoin and the digital assets law: a bold economic strategy One of the most distinctive features of El Salva- dor’s approach to technology and innovation is its commitment to cryptocurrency, particularly Bitcoin. In 2021, El Salvador made history when it became the first country in the world to official- ly adopt Bitcoin as legal tender. This move was part of the country’s broader strategy to mod- ernise its economy and attract investment, par- ticularly in the tech and fintech sectors. Bitcoin’s adoption as legal tender allows Salvadorans to use the cryptocurrency for everyday transac- tions, including paying for goods and services, and enables businesses to accept it as a pay- ment method. While the move initially raised concerns among critics, particularly about Bitcoin’s volatility, El Salvador has continued to double down on its
commitment to digital currencies. The govern- ment sees Bitcoin not just as a currency but also as an avenue to drive financial inclusion, promote investment and enhance the country’s position in the global economy. The Digital Assets Law, passed alongside the Bitcoin Law, provides the necessary regula- tory framework for businesses operating in the cryptocurrency and blockchain space. This law governs the activities of digital asset exchanges, tokenisation platforms and other cryptocurren- cy-related businesses. By offering legal clar- ity and regulatory certainty, the Digital Assets Law aims to attract more international inves- tors and digital asset companies to El Salvador. The law provides guidelines on everything from digital asset transactions and custodianship to initial coin offerings (ICOs) and the creation of tokenised assets, ensuring that the country has a clear legal structure in place for businesses to operate within. These regulations complement the Bitcoin Law by offering a robust framework for companies involved in the broader digital assets ecosys- tem. Together, these two laws send a powerful signal to the global tech community: El Salvador is open for business, particularly for innovative companies in the cryptocurrency, blockchain, and digital finance sectors. Incentives for technology businesses The Law for the Promotion of the Technology Industry is designed to make El Salvador a highly attractive destination for tech startups and established companies alike. One of the key elements of the law is its extensive set of incen- tives for businesses that set up operations within the country. These incentives include tax breaks, exemptions from certain import duties and sup- port for R&D. The country is looking to eliminate
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