The Law will regulate the operations of digital assets to be used in the issuance of public offerings executed in 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. The records are linked and encrypted to protect the security and privacy of transactions.
The same article clarifies that digital assets are not considered securities, and therefore no provisions regarding securities shall apply to them. It also adds that individuals and legal entities may own, exchange, transfer, trade and promote digital assets.
However, the draft bill 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, i.e., it does not apply to Bitcoin when its use is for exchange of goods and services; 3) Digital assets that can only be exchanged for a good or service that is provided by the same issuer of such asset or a limited number of suppliers; 4) Digital assets that cannot be traded or exchanged.
The Law contemplates the creation of the National Commission of Digital Assets, a unit attached to the Ministry of Economy and which will be in charge of the application of the obligations described in the Law, its regulations and other rules of public offerings of digital assets.
The Commission will also verify that public offerings of digital assets are made by the applicable obligations, ensuring the integrity of the market and the provision of information to buyers.
Public offerings may be carried out by the State, the Ministry of Finance, the Central Reserve Bank, Autonomous Regions, individuals and legal entities. Likewise, the offerings may be made with existing digital assets and building new ones, such as tokens that offer a yield on a specific platform or creating original digital assets by the issuer.
The new regulation mandates the creation of a Bitcoin Fund Management Agency that will be responsible for the management, safekeeping and investment of funds from public offerings of digital assets carried out by the state of El Salvador and its autonomous institutions, as well as any yield from these offerings.
On the other hand, a Registry of Digital Asset Services is established where those persons whose business is the exchange of digital assets for fiat money or other digital assets, operate an exchange or trading platform; or place digital assets in platforms or digital wallets may register.
Natural persons may register by using their identity document and indicating their place of domicile in El Salvador. At the same time, legal entities that are foreigners and are domiciled in another country must form a corporation or branch domiciled in El Salvador and duly registered.
-Written by Torres Legal Team.