El Salvador: Bitcoin Law Regulation

On August 27, 2021, the Regulation of the Bitcoin Law (the “Regulation”) was published in the Official Gazette of El Salvador. The Regulations will enter into force on September 8, one day after the entry into force of the Bitcoin Law.

 

The Regulation will be applicable to Bitcoin Service Providers, which are defined as: Natural or legal person who provides for itself or for third parties, service related to bitcoin, and are used as custodians, crypto exchanges, and payment processors or wallets.

 

Bitcoin Service Providers Register (the “Register”) is created, which will be in charge of the Central Reserve Bank (“BCR”). Registration will be mandatory for Bitcoin Service Providers. Prior to the start of operations, they must file to the BCR the application form, deed of Incorporation and ID of the shareholders. It must be filed within 20 business days of the Regulation being effective (no later than October 7).

 

The Regulation establishes as standards of conduct which the Bitcoin Service Providers must comply:

 

  • Have an anti-money laundering program in compliance with local legislation and international practices;
  • Procedures to avoid loss, theft or deterioration of clients’ assets;
  • Record of assets, liabilities and equity of the Service Provider and records of customer accounts and transactions, as well as the claims or complaints of the latter;
  • Publish on its website and in the terms of the application the contact of the SSF to address in case of unresolved complaints from the provider;
  • Cybersecurity program;
  • Physical security program and disaster recovery plan (“BCP”);
  • A resolution plan which prevents for orderly liquidation in the event of insolvency;
  • Limit for transactions according to comprehensive risk management.

The SSF will be in charge of the supervision of the regulations applicable to the Bitcoin Service Providers under the Bitcoin Law. Additionally, it establishes that Banks are empowered (but not obliged), to provide financial services to Bitcoin Service Providers or to open accounts to Bitcoin users. However, Banks must provide services, such as exchange platforms without generating commission, to digital wallets offered by the State in order to guarantee financial inclusion.

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