During the plenary session on Wednesday, January 11, the Legislative Assembly approved the Digital Assets Issuance Law proposed by the Ministry of Economy of El Salvador.

The law will regulate the operations of digital assets used in public offerings executed within Salvadoran territory, as well as the requirements and obligations of issuers, digital asset service providers, and other participants operating in the public offering process.

Article 3 defines a digital asset as a digital representation that can be stored and transferred electronically, with records linked and encrypted to protect the security and privacy of transactions.

The same article clarifies that digital assets are not considered securities, so provisions related to securities won’t apply to them. Similarly, it adds that digital assets can be owned, exchanged, transferred, traded, and promoted by individuals and legal entities.

However, the draft excludes: 1) Digital currencies issued by central banks of any jurisdiction; 2) Digital assets that by prior or subsequent law are legal tender in any country, meaning it doesn’t apply to Bitcoin when used for the exchange of goods and services; 3) Digital assets that can only be exchanged for a good or service provided by the same issuer of that asset or a limited number of providers; 4) Digital assets that cannot be traded or exchanged.

The law envisages the creation of the National Digital Assets Commission, a body under the Ministry of Economy responsible for enforcing the obligations described in the law, its regulations, and other rules related to public offerings of digital assets.

The Commission will also ensure that public offerings of digital assets are conducted in accordance with applicable obligations, ensuring market integrity and providing information to buyers.

Public offerings can be made by the State, the Ministry of Finance, the Central Reserve Bank, autonomous entities, natural and legal persons. Likewise, offerings can be made with existing digital assets and by creating new ones, such as tokens that offer returns on a specific platform or by creating original digital assets by the issuer.

The new regulations mandate the creation of a Bitcoin Fund Administration Agency responsible for managing, safeguarding, and investing the funds from public offerings of digital assets carried out by the state of El Salvador and its autonomous institutions, as well as any returns from these offerings.

On the other hand, a Registry of Digital Asset Services is established, where individuals and entities whose business involves exchanging digital assets for fiat money or other digital assets, operating an exchange or trading platform, or placing digital assets on digital platforms or wallets, can register.

Natural persons can register using their identification documents and indicating their address in El Salvador. Meanwhile, foreign legal entities domiciled in another country must establish an anonymous society or branch domiciled in El Salvador and duly registered.

If you have questions about the Digital Assets Issuance Law, you can contact us through our social media or at our offices.