Crypto license in Salvador

In recent years, El Salvador has become one of the pioneers in cryptocurrency regulation. The government’s progressive stance on cryptocurrencies is illustrated in particular by the adoption of the Digital Asset Issuance Law (DAI Law) on January 11, 2023, which has made El Salvador one of the most preferred jurisdictions in the world to operate as a Digital assets service provider (“DASP”).

An additional reason for DASP registration in El Salvador is the pending entry into force of MICA in Europe, where stricter requirements for authorized capital and operations of cryptocurrency companies will be introduced.

Below we look at the key steps in the process of obtaining a crypto license in El Salvador and the important aspects to consider for effective cryptocurrency transactions in the country.

Benefits of obtaining a cryptolicense in El Salvador

1. Legality. Clear regulatory rules for licensing and operation of DASPs. The government supports the development of the crypto industry.
2. Promptness. A DASP license can be obtained very quickly, but it does require the development of some processes and software.
3. Simplicity. The cryptocurrency license regulator is friendly and responsive, cooperating properly in case of questions.
4. Convenience. Shareholders and directors could be non-residents.
5. Favorable tax regime. Income earned outside of El Slavador is exempt from income tax.

Types of cryptolicenses in El Salvador

The following cryptocurrencies are available in El Salvador:

• BSP license is required for companies that provide various bitcoin-related services, such as exchanging bitcoins for fiat money, making payments in bitcoins, or storing bitcoins on behalf of clients. Under the Bitcoin Act, the issuance of a BSP license is handled by the BCR (Banco Central de Reserva).
• DASP license is required for companies that provide various services related to other cryptocurrencies. According to the DAI Law, the registration of service providers is handled by the National Commission for Digital Assets (Comisión  Nacional De Activos  Digitales; CNAD). This license will be discussed in more detail in this article.

Requirements for obtaining a crypto license in El Salvador

To obtain a crypto license in El Salvador, a company must meet the following requirements:

• Company structure. Presence of at least two shareholders. The founder can be any individual or legal entity that is not on the sanctions lists and does not have a criminal record. One of the members of the Board of Directors must be designated as the person responsible for coordinating the cybersecurity plan.
• Minimum authorized capital of the equivalent to USD 2,000.
• A virtual address is sufficient. A physical address is desirable, but not required.
• Implement cybersecurity standards for the storage and processing of digital assets and conduct external cybersecurity audits.
• Classic bookkeeping: monthly payroll reports, annual financial statements, and tax returns filing. Mandatory quarterly reports filing with the CNAD as a DASP provider.
• AML/KYC Compliance.

The process of obtaining a crypto license in El Salvador

1. Preparation of documents and registration of the company in the Commercial Registry of El Salvador. Limited Liability Company (Sociedad de Responsabilidad Limitada; SRL) is the most popular type of company.
2. Obtaining a DASP license from CNAD.
3. Opening a corporate account. In parallel with registration, a company bank account must be opened to deposit at least 5% of the authorized capital (the required share capital is $2,000).
4. Additional registration with government authorities. After opening a company, it is necessary to contact the Hacienda Tax Authority, the Salvadoran Social Security Institute, the Ministry of Labor and the Ministry of Finance for the appropriate registrations.

Timeline for obtaining a crypto license in El Salvador

The turnkey El Salvador crypto license can take anywhere from 3 to 6 months depending on the services planned and the company’s business plan.

At the end of the process of obtaining a crypto license in El Salvador, you will have a fully operational company authorized to provide cryptocurrency exchange and cryptocurrency storage services.

Conclusion

Despite the relatively new status of cryptocurrency regulation in El Salvador, obtaining a license provides ample opportunity for business development in this area. SBSB Fintech Lawyer has a high level of expertise in financial regulation and international law and will be happy to help you turn your business ideas into reality. We have been specializing in supporting FinTech and Crypto projects since 2013, providing tailored solutions for each client considering the company’s business model. Our lawyers will help you choose the most suitable type of license and prepare the necessary documents for legalizing crypto business and obtaining a cryptocurrency license in El Salvador accordance with the legislation, providing full legal support.