Crypto License in El Salvador

El Salvador became the first country in the world to officially recognize Bitcoin as a legal tender. This decision expanded the opportunities for both individuals and companies to obtain a license for cryptocurrency transactions in El Salvador.

First-to-market advantage
El Salvador being one of the first countries in Latin America to develop a legal framework for cryptocurrencies offers companies the opportunity to pioneer a potentially growing market. By obtaining a crypto license, companies can take a leadership position in the development of the crypto industry in this country.

Ability to open a bank account
Opening bank accounts for cryptocurrency companies can be challenging in most countries. However, in El Salvador, there are several crypto-friendly banks and financial institutions that can provide banking services for cryptocurrency companies if certain conditions and regulations are met, which is very rare.

Tax incentives
El Salvador provides tax incentives for companies and individuals who are involved in cryptocurrencies. These incentives include tax exemptions on the face value, returns, and capital gains from cryptocurrencies. The same applies to issuers, certifiers, and service providers for registered digital assets, who will be exempt from the goods and services transfer tax as well as income tax.

Opportunity to enter a market that supports cryptocurrencies
El Salvador, by making Bitcoin a legal tender and granting a cryptocurrency license, has created a favorable environment for the development of the cryptocurrency industry. These measures create a favorable environment for the development of the cryptocurrency industry, which may attract new companies such as cryptocurrency exchanges, wallet providers, payment systems, and blockchain startups.

Legislative clarity and enforcement
The regulation of the cryptocurrency industry in El Salvador gives companies the confidence that they are operating by the law and complying with regulations. Obtaining a crypto license shows that a company is compliant with legal requirements, including KYC and AML regulations. This can increase a company’s trust and credibility with customers and partners.

Potential for global market entry
El Salvador’s decision to introduce cryptocurrencies and create a regulatory framework could attract international companies looking to expand their business. With a cryptocurrency license, these companies can enter the El Salvador market and explore opportunities to expand their presence in Central and South America. This expansion can be accompanied by increased market reach and potential collaborations with local businesses.

Participation in government programs
El Salvador has expressed its willingness to support cryptocurrencies and blockchain technology. Crypto-licensed companies can enter into collaborations with government initiatives and possibly participate in joint projects related to digital payments, financial inclusion, or blockchain-based solutions. Such partnerships may open up opportunities for joint ventures, research, or participation in government contracts.

Under the Digital Assets Law, cryptocurrency companies in El Salvador are required to comply with certain regulations and standards:

• register a legal entity in El Salvador and apply for a crypto license;
• mandatory to have at least two shareholders in the company;
• provide proof of identity and proof of residency for all board members and shareholders;
• provide a business plan that demonstrates the company’s ability to provide digital services;
• provide a detailed description of the company’s organizational structure, including the names, positions, and specific responsibilities of employees, to ensure clarity and efficiency of internal workflows;
• implement cybersecurity standards to securely store and process digital assets;
• maintain financial records and provide transparency in reporting the company’s operations, including ownership and shareholder information, as applicable;
• comply with all regulations and requirements related to the protection of user and investor interests, including risk disclosure and clawback policies;
• cooperate with regulatory authorities and provide necessary reporting;
• implement systems to prevent, detect, and disclose risks related to financial crimes, such as money laundering and terrorist financing, in compliance with AML/KYC requirements.

If you are having thoughts of setting up a cryptocurrency business in El Salvador, it is important to obtain a crypto license. This is an official permit issued by the government of El Salvador that allows you to conduct cryptocurrency transactions. Obtaining this license will help you grow your business by the law and avoid potential regulatory issues.

There are two types of crypto licenses in El Salvador:

• Bitcoin Service Provider (BSP) License. This 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 Central Reserve Bank.
• Digital Asset Service Provider License (PSAD). This license is required for companies that provide a variety of services related to other cryptocurrencies. Under the new Digital Assets Act, registration of service providers, asset issuers, and certifying organizations is handled by the National Digital Assets Commission.

To obtain any of these licenses, it is necessary to strictly comply with the rules and regulations outlined in the Digital Assets Law.

Obtaining a cryptocurrency license in El Salvador offers the following advantages:

• allows companies to operate officially and legally in El Salvador;
• opens access to the El Salvador market, which can be accompanied by a potential increase in the customer base;
• helps to build the confidence of customers and investors, as the company operates in compliance with the law;
• helps to reduce the risk of potential legal problems as the company complies with regulatory requirements.

Unregistered activities or operating without an official license can result in fines or even criminal liability.

Registering a cryptocurrency company in El Salvador involves many steps:

• Selecting the best organizational structure.Before proceeding with the creation of the company, it is necessary to choose the most appropriate type of organizational structure. In El Salvador, the most common types of companies are limited liability companies and corporations.
• Choosing an appropriate company name.The chosen company name must be registered with the Commercial Registry of El Salvador.
• Preparation of the necessary set of documents.
  The list of documents includes notarized copies of the passports of the board of directors, proof of physical address, bank statements, etc.
• Submission of the application for registration to the appropriate authority responsible for registering the company.
  Once the application is submitted, it will be subjected to review by the competent authorities. If the application is approved, your company will be registered and you will be issued an official certificate of incorporation, which will confirm its legal status.
• Opening a corporate bank account.
  To successfully incorporate your company, you will need to deposit at least 5% of the authorized capital, which is $2,000, into a corporate account. Most banks in El Salvador require your physical presence to open a corporate account. However, some local banks have the option to conduct the process remotely or through an intermediary.
• Registration with other public authorities.
  Once your registration is approved, you will need to contact the Hacienda tax authority, the Salvadoran Social Security Institute, and the Ministry of Labor to register your company under Salvadoran law.You will also need to register your company with the Ministry of Finance within 15 days of approval of registration.
• Obtaining a Crypto License.
  Bitcoin service provider registration with BCR.
  Under the Bitcoin law, companies or individuals providing BTC-related services must list themselves in the Registry of BTC Service Providers at the Central Reserve Bank. For this purpose, it is necessary to go through the registration procedure and obtain a Certificate of Registration. Once this procedure is completed, the company will be subject to regular supervision by the SSF and FIU to ensure compliance with the rules for the prevention of terrorist financing and money laundering in El Salvador.
  Registration of a digital asset service provider with the CNAD.
  According to the recently enacted Digital Asset Issuance Law, the registration of service providers, asset issuers, and certifying organizations is done through the procedures established by the National Commission for Digital Assets.

Companies listed in the Registry of Digital Asset Service Providers (RPSAD) in El Salvador have the following tax benefits:

exemption from all types of fees, taxes, duties, and assessments on the nominal value and yield of digital assets;
exemption from taxes on capital gains and ordinary income derived from the purchase, sale, or transfer of digital assets;
exemption from goods and services transfer tax, income tax, and other tax liabilities for issuers, certifiers, and service providers of digital assets.
However, cryptocurrency companies are required to pay various fees associated with their licenses, including a registration fee and an annual fee. The amount of these fees depends on the type and size of the cryptocurrency company.

According to the official website of the National Commission for Digital Assets in El Salvador, companies applying for a cryptocurrency license are required to pay a one-time registration fee of $5,475. In addition, El Salvador sets annual fees for the renewal of a crypto license. The fee for a Digital Asset Service Provider (DASP) license is US$3,650 per year.

These fees can be paid in USD or its equivalent in bitcoins, based on the official exchange rate set by the Central Reserve Bank of El Salvador. The application fee must be paid within 30 days of application. The annual fee must be paid within 30 days of the expiration of the previous annual license. Businesses that fail to pay their fees on time may be subject to fines or lose their license.