By: Daniel Leiva
Recently, El Salvador took a bold and unprecedented step in the world of cryptocurrencies and digital assets. In a historic decision, our country approved in 2021 the Bitcoin Law, which recognizes it as legal tender and established a regulatory framework for the use and circulation of bitcoin in El Salvador, becoming the first step for the development of the digital asset ecosystem in the country.
This decision represented a milestone in the history of crypto-assets and an opportunity for El Salvador to become a global leader in the use and adoption of digital assets. However, it also poses significant legal and regulatory challenges that must be carefully and thoughtfully addressed to ensure the security and stability of the country’s financial system. The legal framework in relation to bitcoin was supplemented with the Regulation of the Bitcoin Law, the Law on the Creation of the Bitcoin Trust and the technical standards and guidelines for the integration of the bitcoin ecosystem into the traditional financial system.
On January 11, 2023, El Salvador once again positioned itself as an exponent in the regulatory field of digital assets through Legislative Decree 643, which contained the Law of Issuance of Digital Assets. The new law establishes a series of requirements for digital asset service providers, including licensing, regulatory and transparency requirements. Providers must comply with certain obligations and requirements to provide their services. Although the regulatory framework still needs to be completed through the technical standards and regulations of the authorities created, this new legal instrument is a regulatory milestone that provides certainty to digital asset issuances in the country and therefore transparency and protection over client assets.
The new regulation on digital assets in El Salvador represents an unprecedented opportunity for innovation and economic growth. The country can become a world leader in the use and adoption of digital assets, attracting investment and fostering technological innovation.
Ultimately, the key to the success of the new regulation on digital assets in El Salvador will be a balanced and careful approach that promotes innovation and economic growth without compromising the security and stability of the country’s financial system. If this balance is achieved, the new law could be a model for other countries looking to adopt and regulate digital assets in the future.