On-shore VASP in El Salvador
Locally-incorporated VASP that operates under full local jurisdiction, holding all required licenses and registrations.
On-shore VASP is conditionally permitted in El Salvador with a local entity, subject to AML obligations and high licensing burden.
Verdict Details
- Permitted
- conditional
- Local entity required
- Yes
- Licensing burden
- High
- Last updated
- 2026-07-13
AML Obligations
- VASPs must register/license as a Digital Asset Service Provider (PSAD) with CNAD under the Digital Assets Issuance Law (Ley de Emisión de Activos Digitales).
- VASPs fall under the scope of the Ley Contra el Lavado de Dinero y de Activos (LCLDA) and must implement robust AML/CFT programs.
- VASPs must comply with the Law for the Regulation of Virtual Asset Service Providers (LRPVAS) promulgated June 2023, which imposes explicit AML/CFT obligations.
- VASPs must follow the Normas para la Prevención del Lavado de Dinero y Activos y del Financiamiento del Terrorismo (NPLDFT) issued by the SSF.
- Customer identification and verification (KYC): obtain and verify identity using reliable independent source documents (national ID, passport) for natural persons; for legal entities, verify legal name, proof of incorporation, articles, directors, beneficial owners, and authorized signatories.
- Beneficial ownership: identify and verify individuals who ultimately own or control 25% or more of a legal entity.
- Customer risk classification (low, medium, high) with enhanced due diligence (EDD) for higher-risk customers including PEPs, requiring senior management approval and source-of-funds/wealth verification.
- Ongoing transaction monitoring — review customer relationships regularly to ensure transactions are consistent with knowledge of customer, business, and risk profile.
- Maintain up-to-date customer information, especially for high-risk customers.
- Report suspicious transactions to the relevant authorities (Fiscalía General de la República for criminal matters).
- Segregation of client digital assets from proprietary assets is required (Digital Assets Issuance Law, Article 20).
- Custodians must implement mechanisms for financial guarantee or insurance funds for the benefit of clients to cover potential losses (Digital Assets Issuance Law, Article 22).
Key Restrictions
- Must be legally constituted in El Salvador — local incorporation required.
- Must obtain a PSAD license from the CNAD before offering digital asset services (including custody, exchange, transfer).
- Minimum capital requirements apply (amounts to be defined by CNAD technical norms).
- Must meet fit-and-proper requirements for directors and management.
- Must establish robust governance, risk management, and internal control systems.
- Client digital assets must be segregated from proprietary assets; technical/organizational safeguards must protect private keys.
- Must maintain financial guarantees or insurance funds for client protection (details per CNAD norms).
- Bitcoin as legal tender is exempt from capital gains tax, but other digital assets (altcoins, stablecoins, NFTs) likely subject to 10% capital gains tax on sale.
- Income tax at progressive rates up to 30% (individual) or 30% (corporate) applies to income from crypto-related activities (mining, staking, lending, trading).
- Value Added Tax (IVA) at 13% applies to services fees associated with crypto transactions performed in El Salvador.
Key Risks
- CNAD licensing framework is relatively new (enacted January 2023) — technical norms and detailed capital requirements are still being developed, creating regulatory uncertainty.
- Limited enforcement precedent for private VASPs — enforcement actions to date have focused on state-sponsored Chivo Wallet issues rather than private-sector non-compliance.
- Regulatory ambiguity around non-Bitcoin digital assets (altcoins, stablecoins, NFTs) — their tax treatment and classification under securities/commodities law is not fully settled.
- Bitcoin exemption from capital gains tax may create confusion for multi-asset VASPs that handle both Bitcoin and other digital assets.
- Dual oversight by CNAD (digital assets regulation) and SSF (AML/CFT supervision for financial entities) could create overlapping or conflicting compliance requirements.
- Political risk: government's pro-Bitcoin stance may shift with administration changes; regulatory framework is still maturing.
Evidence
This verdict synthesizes the following facts. Each fact links to its primary source(s).
Comisión Nacional de Activos Digitales (CNAD): (National Commission of Digital Assets)
Ley de Emisión de Activos Digitales (Digital Assets Issuance Law)
Role: Established by the Digital Assets Issuance Law, CNAD is a specialized body responsible for regulating the issuance, public offering, and transfer of digital assets (excluding Bitcoin as legal tender). This includes overseeing tokenized securities and ensuring investor protection in the digital asset market.
Ley Bitcoin (Bitcoin Law)
Ley de Emisión de Activos Digitales (Digital Assets Issuance Law) - Enacted January 10, 2023:
Who: Any entity intending to provide "custody services" for digital assets to third parties must be licensed as a Digital Asset Service Provider (Proveedor de Servicios de Activos Digitales - PSAD).
Requirements: Applicants must meet several criteria, including:
Legal constitution in El Salvador.
Minimum capital requirements (to be defined by CNAD norms).
Digital Assets Issuance Law, Article 12: States that "Digital Asset Service Providers may offer, among others, the following services: ... b) Custody services of Digital Assets owned by third parties."
Digital Assets Issuance Law, Article 12: States that "Digital Asset Service Providers may offer, among others, the following services: ... b) Custody services of Digital Assets owned by third parties."
Ley Contra el Lavado de Dinero y de Activos (LCLDA)
Ley de Regulación de los Proveedores de Servicios de Activos Virtuales (LRPVAS)
Normas para la Prevención del Lavado de Dinero y Activos y del Financiamiento del Terrorismo (NPLDFT)
Identification and Verification:
Beneficial Ownership: Identify and verify the identity of beneficial owners (individuals who ultimately own or control 25% or more of the entity) for legal entities.
VASPs must classify customers based on their AML/CFT risk (low, medium, high) and apply enhanced due diligence (EDD) measures for higher-risk customers.
Politically Exposed Persons (PEPs) are always considered high-risk and require EDD, including senior management approval and establishing the source of wealth/funds.
Bitcoin (BTC) as Legal Tender:
General Capital Gains Tax Rate: El Salvador applies a 10% capital gains tax on the sale of movable and immovable property (excluding certain specified assets). It is highly probable that profits from trading cryptocurrencies other than Bitcoin would fall under this 10% rate if they are considered assets.
Corporate Income Tax Rate: The standard corporate income tax rate is 30%.
Income from Crypto-Related Activities (Mining, Staking, Lending, Trading Other Cryptos):
Similar to Bitcoin, the mere transfer or exchange of other cryptocurrencies is generally not subject to IVA.
Comisión Nacional de Activos Digitales (CNAD) - National Commission of Digital Assets:
Chivo Wallet Issues & Internal Controls:
Digital Assets Issuance Law & CNAD Licensing:
Pro-Bitcoin Stance: El Salvador's government has been a proponent of Bitcoin adoption, aiming to attract investment and innovation in the crypto space. This has meant less of a "crackdown" mentality and more of a "build the framework" approach.
Verdict Attribution
- Source:
- AI-Generated · Unreviewed
- AI synthesized:
- 2026-07-13 (deepseek-chat)
- Last updated:
- 2026-07-13
- Confidence:
- medium
This verdict was produced by an AI model from the underlying facts. Confirm with counsel before relying on it for material decisions.
Conditional — a locally-incorporated on-shore VASP (Digital Asset Service Provider/PSAD) is permitted in El Salvador but must obtain a CNAD license, meet minimum capital and governance requirements, comply with comprehensive AML/CFT obligations under the LCLDA, LRPVAS, and SSF norms, and adhere to segregation and financial guarantee mandates for client assets.
Questions this verdict aims to answer
- What license(s) are required to operate locally?
- What capital, governance, and reporting obligations apply?
- What is the application process and timeline?