Digital Asset Issuance Law
Digital Asset Issuance Law
Published on may 08 , 2023
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Roberto Ernesto Pascacio Rivera - Legal Collaborator
On February 1, 2023, Decree No. 643 issued by the Legislative Assembly on January 11, 2023 and published in the Official Gazette No. 16, Volume 438, of January 24, 2023, on Economy, came into force, consisting in establishing the legal framework that provides legal certainty to the transfer operations of digital assets used in public offerings in El Salvador, as well as to the issuers and service providers of digital assets and other participants of the public offerings.
Digital assets are defined as a digital representation that can be stored and transferred electronically, using a distributed registry technology system, in which the records are linked and encrypted to protect the security and privacy of transactions. The purpose of these regulations is to enable the State to make or promote offers to the public of digital assets, or to seek admission of such assets for the purpose of selling or trading them on an exchange or trading platform.
Among the digital asset services covered by the law are the following: a) exchanging digital assets for fiat money or equivalent or for other digital assets either using own or third party capital, b) operating an exchange or trading platform for digital assets or their derivatives, c) placing digital assets in digital platforms or wallets, e) promoting, structuring and managing all types of investment products in digital assets and f) operating on behalf of and in favor of third parties in the following cases: 1) transfer digital assets or the means to access or control them, between natural or legal persons or between different acquirers, electronic wallets or digital asset accounts; 2) safeguard, custody or manage digital assets or the means to access or control them; 3) receive and transmit orders for the purchase or sale of digital assets or the trading of derivative digital assets; and, 4) execute orders for the purchase or sale of derivative digital assets.
However, the rules contained in the law will not be applicable to the following digital assets: a) digital currencies issued by the central banks of another country, jurisdiction or territory; b) digital assets that are legal tender in any country, territory or jurisdiction; c) digital assets that can only be exchanged for a good or service that is provided by the issuer of such digital asset or by a limited number of suppliers of such good or service and d) digital assets that cannot be traded or exchanged.
Those in charge of applying the norms contained in the law are the National Commission of Digital Assets, which will be in charge of authorizing, suspending or canceling the public offerings of digital assets, and will also be in charge of managing the Registry of Service Providers of Digital Assets, Registry of Issuers of Digital Assets, Registry of Authorized Certification Entities in the country, and will be in charge of a board of directors formed by three designated and their respective alternates, appointed by the President of the Republic, the Secretary of Commerce and Trade and the Secretary of Economy of the Republic, Registry of Authorized Certification Entities in the country and will be in charge of a board of directors formed by three designated and their respective alternates, appointed by the President of the Republic, the Secretary of Commerce and Investments of the Republic and by the Ministry of Economy, who will last in their positions for five years; and the Bitcoin Funds Administration Agency, in charge of the administration, safeguard and investment of the funds coming from the public offerings of digital assets made by the State and the yields coming from such public offerings, which will be in charge of an administrator appointed by the President of the Republic for a period of five years.
The benefits for issuers, providers, certifiers and acquirers of digital assets, are the following: a) the yield of the digital assets will be determined at the time of the transaction, according to the conditions of the digital asset market, b) the nominal value and the yields or income from digital assets will be exempt from all kinds of levies, tributes, taxes, duties, fees and contributions, of any kind and nature, present or future, whether ordinary or extraordinary or even special, c) the issuers, certifiers and registered digital asset service providers will enjoy all the tax benefits established in paragraph b) of article 36 of the above mentioned law, and d) in the case of legal entities, the tax benefits of paragraphs b) and c) will be applied both to the entity and to the partners or shareholders individually considered, with respect to the profits or dividends from the activities detailed in the above paragraphs.
With the entry into force of this law, innovative measures are adopted to attract foreign investment in technology, and the regulatory framework for the issuance of public offerings of digital assets is created, which allows the public and private sectors to finance themselves in the emerging market of digital assets.
Digital assets are defined as a digital representation that can be stored and transferred electronically, using a distributed registry technology system, in which the records are linked and encrypted to protect the security and privacy of transactions. The purpose of these regulations is to enable the State to make or promote offers to the public of digital assets, or to seek admission of such assets for the purpose of selling or trading them on an exchange or trading platform.
Among the digital asset services covered by the law are the following: a) exchanging digital assets for fiat money or equivalent or for other digital assets either using own or third party capital, b) operating an exchange or trading platform for digital assets or their derivatives, c) placing digital assets in digital platforms or wallets, e) promoting, structuring and managing all types of investment products in digital assets and f) operating on behalf of and in favor of third parties in the following cases: 1) transfer digital assets or the means to access or control them, between natural or legal persons or between different acquirers, electronic wallets or digital asset accounts; 2) safeguard, custody or manage digital assets or the means to access or control them; 3) receive and transmit orders for the purchase or sale of digital assets or the trading of derivative digital assets; and, 4) execute orders for the purchase or sale of derivative digital assets.
However, the rules contained in the law will not be applicable to the following digital assets: a) digital currencies issued by the central banks of another country, jurisdiction or territory; b) digital assets that are legal tender in any country, territory or jurisdiction; c) digital assets that can only be exchanged for a good or service that is provided by the issuer of such digital asset or by a limited number of suppliers of such good or service and d) digital assets that cannot be traded or exchanged.
Those in charge of applying the norms contained in the law are the National Commission of Digital Assets, which will be in charge of authorizing, suspending or canceling the public offerings of digital assets, and will also be in charge of managing the Registry of Service Providers of Digital Assets, Registry of Issuers of Digital Assets, Registry of Authorized Certification Entities in the country, and will be in charge of a board of directors formed by three designated and their respective alternates, appointed by the President of the Republic, the Secretary of Commerce and Trade and the Secretary of Economy of the Republic, Registry of Authorized Certification Entities in the country and will be in charge of a board of directors formed by three designated and their respective alternates, appointed by the President of the Republic, the Secretary of Commerce and Investments of the Republic and by the Ministry of Economy, who will last in their positions for five years; and the Bitcoin Funds Administration Agency, in charge of the administration, safeguard and investment of the funds coming from the public offerings of digital assets made by the State and the yields coming from such public offerings, which will be in charge of an administrator appointed by the President of the Republic for a period of five years.
The benefits for issuers, providers, certifiers and acquirers of digital assets, are the following: a) the yield of the digital assets will be determined at the time of the transaction, according to the conditions of the digital asset market, b) the nominal value and the yields or income from digital assets will be exempt from all kinds of levies, tributes, taxes, duties, fees and contributions, of any kind and nature, present or future, whether ordinary or extraordinary or even special, c) the issuers, certifiers and registered digital asset service providers will enjoy all the tax benefits established in paragraph b) of article 36 of the above mentioned law, and d) in the case of legal entities, the tax benefits of paragraphs b) and c) will be applied both to the entity and to the partners or shareholders individually considered, with respect to the profits or dividends from the activities detailed in the above paragraphs.
With the entry into force of this law, innovative measures are adopted to attract foreign investment in technology, and the regulatory framework for the issuance of public offerings of digital assets is created, which allows the public and private sectors to finance themselves in the emerging market of digital assets.