El Salvador Legislators Explore Regulating Digital Assets

A committee of the Legislative Assembly of El Salvador is studying a long-awaited law regulating digital asset service providers and issuers in the nation.

The so-called “digital asset issuance law” would provide a legislative framework for digital asset issuers in El Salvador and establish a national commission regulating their certification and activities.

The proposed digital asset legislation is now with the economic committee of the Legislative Assembly, according to a document reviewed by The Block and confirmed by a webcast of a November 22 plenary session.

The new law would have the “aim of promoting the efficient development of the digital asset market and protecting the interests of the acquirers,” according to the text.

It is notable because it widely refers to digital assets rather than concentrating just on bitcoin, which El Salvador recognised in September 2021 as legal cash. Nonetheless, this current plan focuses on establishing guidelines for digital marketing assets to the public instead of making other cryptocurrencies lawful money.

Under the proposed legislation, digital asset service providers in El Salvador would be required to register and adhere to several regulations. These businesses would be required to provide a list of the digital assets they intend to offer, along with their “benefits, restrictions, and limits.” In addition to revealing the identities and titles of corporate personnel, they would be required to show cybersecurity safeguards and customer service skills.

Issuers of digital assets would also be required to adhere to specific regulations, such as revealing the jurisdictions or nations in which they operate.

The proposal also calls for establishing a so-called “bitcoin fund management agency” responsible for “the administration, safekeeping, and investment of funds from public offerings of digital assets carried out by the state of El Salvador and its autonomous institutions and the returns from said public offerings.”

Additional regulations about digital assets or securities may be forthcoming. In February, El Salvador’s president Nayib Bukele said that the government was working on 52 securities regulations, tax incentives, and other changes.

The Block claimed that El Salvador was building a legislative framework for digital asset service providers in preparation for the mid-March debut of its so-called “bitcoin bond,” which has not yet occurred.

Tether and Bitfinex Chief Technology Officer Paolo Ardoino said at the time that the government of El Salvador was working on a means to licence firms that sell digital assets. Bitfinex Securities said it planned to seek a licence so the bitcoin bond issuer could raise money via its platform. However, it was still awaiting the completion of the regulatory framework.

“Digital securities law will enable El Salvador to be the financial centre of Central and South America,” Ardoino tweeted.