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29 de November de 2022
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Digital Asset Issuance Law

[vc_row][vc_column][vc_column_text] Digital Asset Issuance Law The main objective of this Law, which will enter into force 8 days after its publication in the Official Gazette, is to establish a legal framework that provides legal certainty to transfer operations of any digital asset title used in the issuance of public offerings; it regulates the requirements and […]

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Digital Asset Issuance Law

The main objective of this Law, which will enter into force 8 days after its publication in the Official Gazette, is to establish a legal framework that provides legal certainty to transfer operations of any digital asset title used in the issuance of public offerings; it regulates the requirements and obligations of issuers, service providers, and other participants operating within the public offering process. This is aimed at developing the digital asset market and protecting the interests of acquirers. According to Article 3 of the Law referred to below, digital assets will in no case be considered securities; therefore, they are excluded from the provisions that regulate them. Likewise, Article 4 excludes from this Law:

  • Digital currencies issued by Central Banks of any country;
  • Digital assets that, by other law, are legal tender in any country, in terms of their monetary regulation and when their use is intended for the exchange of goods and services, except those regulated in articles 19 and 26 of the Law;
  • Digital assets that can only be exchanged for a good or service, provided by the issuer of the asset;
  • Digital assets that cannot be traded or exchanged.

For our part, we must bear in mind that it will be understood bytransmitterThe State, or any person – natural or legal, public or private – that promotes or makes an offer to the public of digital assets or that seeks the admission of a digital asset for sale or marketing on an exchange or trading platform, of any nature, whether regulated or not, and that meets at least one of the following conditions:

  1. Domiciled in the country;
  2. Not domiciled in El Salvador, but using an exchange or trading platform that is domiciled in the country;
  3. Not domiciled in the country, but seeking to promote or make a public offer to potential Salvadoran buyers, unless the latter initiates, on its own behalf, the commercial relationship with the offeror.

Thus, it will be understood assuppliera person – natural or legal – whose ordinary business involves providing digital asset services and who also meets one of the following conditions:

  1. Domiciled in the country;
  2. Not be domiciled in the country, but actively promote or market services to potential clients in the country.

This law creates the National Digital Assets Commission, which, among other things, will be responsible for verifying that public offerings of digital assets comply with the regulations that govern them and will inform purchasers. Likewise, the Bitcoin Fund Management Agency is created, a public entity with legal personality and its own technical and autonomous assets, to exercise the powers and duties established by law. The Agency will be responsible for the administration, safekeeping, and investment of a) funds from public offerings of digital assets carried out by the State of El Salvador and its autonomous institutions; and b) returns from these public offerings. It is also emphasized that investment in public works and projects should be prioritized. Chapter IV of this law, dedicated to regulating the activities of digital asset service providers, establishes the creation of the Registry of Digital Asset Service Providers. Anyone intending to offer and provide digital asset services must be registered with the National Digital Assets Commission.

  • Natural persons: to register, present your DUI or resident card and indicate your address in the country;
  • Legal entity: For registration, you must present your legal entity. If you are a foreigner domiciled in another country, you must form a corporation or branch domiciled in El Salvador and registered with the National Registry of Residents (CNR), and present the legal entity of that corporation to the Commission.

Digital Asset Services– regulated in Art. 19, the Law establishes that suppliers may carry out the following activities:

  1. Exchange of digital assets for fiat money or its equivalent or for other digital assets;
  2. Operate a platform for the exchange or trading of digital assets or derivatives;
  3. Risk and price assessment, subscription of digital asset issues;
  4. Placing digital assets on digital platforms or wallets;
  5. Promote, structure and manage all types of investment products in digital assets;
  6. When any of these operations are carried out on behalf of and in favor of third parties:
  7. Transferring digital assets or the means of accessing or controlling them, between natural or legal persons or between different acquirers, electronic wallets or digital asset accounts;
  8. Safeguard, guard or manage digital assets or the means to access or control them;
  9. Receiving and transmitting orders to buy or sell digital assets or trading derivative digital assets;
  10. Execute purchase or sale orders for digital derivative assets.

Digital Asset Service Provider Requirements:regulated in Article 20 of this Law, are as follows: To be so, whoever wishes to be so must be registered as a digital asset service provider and must:

  1. Demonstrate that you have the ability to offer what you indicate in the registration form;
  2. If you are faced with one of the situations described in paragraphs a., b., d., and f., listed above, you must have a list of the digital assets you intend to trade, including benefits, restrictions and limits on the assets, and financial and commercial restrictions. You must also implement appropriate cybersecurity standards on your platform for the transactions you will carry out, according to the Commission's guidelines;
  3. Provide details of your organizational structure, including, but not limited to, names, positions, and specific functions;
  4. Demonstrate that it has a system of providing customer service in a coherent and efficient manner, according to the nature of the service;
  5. For already registered service providers, you must pay an annual renewal fee for the first three months of each year, regardless of the initial registration date.

The Commission will establish the remaining technical, financial, and commercial parameters through its respective regulations. Once submitted, the Commission will have 20 business days to issue a resolution—favorable or unfavorable. Favorable: The supplier will proceed to pay the fee. After verifying compliance with the requirements and receiving payment, the supplier will be assigned a registration number.Obligations:regulated in Article 21 of the normative body to which we now refer, we can mention:

  1. Be duly registered;
  2. Carry out their activities in an honest and integral manner;
  3. Pay due attention to the interests and needs of all clients;
  4. Provide accurate and easily available information on its platforms;
  5. Comply with the tasks of reporting to the Commission in the cases provided by law, including the cessation of activity and request for deregistration, and each time they admit a stablecoin for trading on their platform, with its respective technical and commercial characteristics.

Among others.IssuersTo be so, Art. 22 establishes therequirementsThis article clarifies that even those issuing stablecoins may conduct public offerings as long as they meet the following requirements:

  1. Legal entity: must provide a general description of the business or regular activity, date of incorporation, registration, and address. Natural person: their full name, ID, residency card or passport, and address;
  2. Indicate the LRU of your main website;
  3. Identify jurisdictions, countries or territories where it operates;
  4. Provide a list of digital assets issued in public offerings elsewhere in the last 3 years;
  5. Comply with all requirements and conditions set forth in regulations and technical standards issued by the Commission.

This information will be included in the Relevant Information Document that will be submitted for the public offering to be certified and authorized. Issuers must report any changes to the information mentioned herein within a period of no more than 10 business days from the date of the change. Once the public offering is authorized, the issuer will automatically become part of a registry of issuers managed by the Commission. Issuers will be responsible for the accuracy of the data they report in their offers, as well as for the information and documents they provide. They must also have effective mechanisms to control and safeguard the funds or digital assets obtained during the public offering and must explain how the funds or other assets are held in custody. Furthermore, Article 25, third paragraph, establishes the obligations that issuers must permanently comply with, including keeping information on the requirements established by law up-to-date. Article 26 et seq. of this law regulates the functions, requirements, registration, and responsibilities of certifiers. Among these, we can mention the mandatory nature of any public offering of digital assets, which must comply with the authorization process. This will be done after a comprehensive prior analysis of the offering requirements, and then a favorable or unfavorable report will be issued. It is also worth mentioning that registered certifiers must pay an annual fee for registration renewal. Finally, and as contained in Articles 30 et seq. of this law, the issuance, exclusion, and documentation of public offerings of digital assets are regulated. In this sense, it is understood that a public offering of this nature exists when they are offered to the public en masse and are intended for commercialization or sale. They must be carried out by issuers, using existing digital assets and creating new ones. These can be carried out by the State, the Ministry of Finance, the Central Reserve Bank, and autonomous institutions (natural or legal persons). All private offerings are excluded from this law, according to Article 31. When a public offering is planned, a Relevant Information Document must be prepared, certified, and submitted to the Commission for approval. The regulations of this law will establish the content and parameters to be included. It also establishes that providers are obligated to supply products at economically competitive prices and conditions that are directly related to the nature of the service being provided. All this information must be submitted to the Commission, and users must be clearly and visibly informed within their platforms and applications. Furthermore, providers and issuers must refrain from carrying out actions established in Article 35 that result in market manipulation, including damaging or delaying the operation of the digital asset trading platform or carrying out any activity that may have this effect. This law also establishes the rules so that duly registered issuers and providers, as well as certifiers and acquirers, can enjoy the benefits set forth in Article 35. 36. Finally, Chapter VI, "Infractions and Sanctioning Regime," regulates the procedure for imposing sanctions and the list of cases that constitute infractions. Thus, regulated subjects may be subject to sanctions if they commit any of the offenses provided for in Article 38. The sanctions are as follows, each with a comprehensive list of infractions:

  1. Fine of up to one hundred and fourteen minimum wages in the commerce and services sector for each violation;
  2. Fine to be determined between one hundred and fifteen and three hundred and five minimum wages in the commerce and services sector for each violation;
  3. Issuers that clearly and materially fail to comply with the terms and conditions set forth in their Relevant Information Document shall be sanctioned with a fine ranging from 306 to 1,200 minimum wages in the commerce and services sector; if imposed as a consequence of the violation committed, it shall be paid five days after the fine becomes final, with a surcharge of 20% of the total amount of the fine imposed.
  4. Issuers will be sanctioned with a fine of up to 1% of the value of the initial public offering when they commit any of the established infractions;
  5. Certifiers, by issuing a resolution determining a breach of their responsibilities and guidelines issued by the Commission, are sanctioned with suspension from their duties for a period of 45 calendar days; a subsequent internal hearing is held to determine whether the suspension is permanently revoked or authorized.

For its part, we must consider that the Commission will accept electronic signatures, as long as the legal requirements are met, for all its procedures and formalities, including the submission of documents and requests for information from issuers, certifiers, and suppliers. Every service provider operating prior to the entry into force of this law must apply for registration in the Registry, complying with the requirements of Articles 18 and 20, within 10 business days after its entry into force. Upon request, they may obtain provisional registration valid for 6 months. Failure to submit it within this period will prevent them from continuing their operations, and they will be required to submit an application once the regulation enters into force. [/vc_column_text][us_separator][vc_column_text] Written by: Lic. Valeria García [/vc_column_text][/vc_column][/vc_row]