Frequently Asked Questions

Tokenization refers to the process of converting rights to an asset into a digital token on a blockchain. This digital representation allows for the secure and transparent trading or transfer of assets, such as real estate or stocks. Essentially, tokenization facilitates the digitization of assets, enabling faster and more efficient transactions.

Examples of assets that can be tokenized include real estate properties, stocks and equities, artwork and collectibles, commodities like gold or oil, intellectual property such as patents or copyrights, and investment funds like real estate investment trusts (REITs) or venture capital funds. Tokenization provides investors with fractional ownership opportunities and greater accessibility to diverse asset classes within the financial market.

El Salvador’s pioneering adoption of Bitcoin, backed by rigorous regulatory measures and an experienced regulatory team at the National Commission of Digital Assets (CNAD), creates an ideal environment for asset tokenization. This innovative process transforms real-world assets into digital tokens, facilitating efficient transactions.

Additionally, El Salvador’s government support, streamlined approval processes, and strategic location offer compelling incentives for investment, driving economic growth and fostering new avenues for development.

For more information on this topic:
Why Tokenize in El Salvador?

Entities interested in tokenizing in El Salvador must comply with all the requirements established in the Regulation for the Registration of Issuers and Public and Private Issues, as well as the Regulation for the Issuance of Stable Currency Public Offerings, if applicable. Among the most important requirements that the CNAD evaluates to issue a resolution of authorization or non authorization of an issuance are the agents involved in the tokenization, such as the Digital Asset Providers and the Certifier. It also evaluates the Relevant Information Document and the Certifier’s Report, which detail the processes of creation, placement, custody and administration of the digital asset, as well as the financial, legal, technical and administrative analyses of the issue, which allow the Commission to determine the viability of the issue and whether the interested entity has the capacity to subscribe an issue.

The Law on Issuance of Digital Assets and its regulations do not define an exhaustive list of assets susceptible to tokenization. Therefore, we understand that both rights with economic content and assets may be subject to tokenization. Consequently, it will be up to the Commission to assess the feasibility of each tokenization project requesting authorization, considering the relevant legal, financial and technological requirements, and exercising its oversight in a risk-based manner.

Public Issuer and Issuance

1. Requirements Compliance: The issuer must meet the requirements outlined in Article 22 of the LEAD in relation to Articles 4, 12, 13, 20, and 22 of the Regulation. Additionally, they should have a structurer duly registered with the CNAD.
2. Document Submission: Submit the required documentation, including the Relevant Information Document (DIR), and a report issued by a certified professional.
3. Evaluation and Resolution: CNAD will evaluate the submission within 5 business days and issue a resolution. If approved, a registry entry will be assigned upon payment of the registration fee.

Private Issuance

1. Documentation Requirements: Comply with the requirements specified in Articles 24 and 25 of the Regulation, and have a registered structurer for the issuance.
2. Document Submission: Submit the necessary documentation in digital and physical format to CNAD offices.
3. Evaluation and Resolution: CNAD will evaluate within 20 business days and issue a “No Objection” resolution if everything is in order.

Stablecoin Issuance

1. Issuer and Issuance Requirements: Fulfill the requirements of Article 22 of the LEAD and have a PSAD registered with CNAD for the placement and marketing of the stablecoin.
2. Document Submission: Submit the relevant documents, including the Relevant Information Document (DIR) and a report from a certified professional.
3. Approval or Denial: CNAD will evaluate within 5 business days and issue a “No Objection” resolution if approved, leading to the assignment of a registry entry after payment of the registration fee.

Each process involves fulfilling specific criteria, submitting documentation, and undergoing CNAD’s evaluation for approval or denial. For more information on each process: click here. 

At the National Commission of Digital Assets (CNAD) in El Salvador, we understand the importance of mitigating risks associated with tokenization. By establishing a vigorous regulatory framework, we provide essential safeguards to investors and businesses alike. Without proper regulation, the risks of tokenization can include fraudulent activities, lack of transparency, and vulnerability to market manipulation.

However, with our comprehensive regulatory system in place, backed by the government of El Salvador, we ensure transparency, compliance, and security, reducing these risks significantly. By adhering to our regulatory standards, entities can confidently navigate the tokenization process, knowing it is completely legal and backed by the government, getting access to the benefits of digital asset investment while minimizing potential risks.

Tokenization offers a multitude of benefits to investors, including:

1. Acquirers of digital assets will enjoy tax benefits, in accordance with Article 36 of the Digital Asset Issuance Law;
2. Investors have access to traditionally inaccessible markets;
3. Investors will be interacting in a regulated digital asset ecosystem;
4. Tokenization allows investing at a lower cost, due to the elimination of intermediaries in the transaction process.
5. Tokenization will allow assets to be fractionalized into smaller units, which facilitates portfolio diversification and lowers the barrier to entry for investors wishing to participate in high-value assets;
6. Tokenization can increase asset liquidity, as digital tokens can be traded in secondary markets more efficiently and with faster settlement times compared to traditional market assets;
7. Tokenization allows investors to access global markets 24 hours a day, facilitating cross-border investment and increasing trading opportunities

The Law of Issuance of Digital Assets facilitates the inclusion of foreign entities in El Salvador’s tokenization system. Under this law, an entity may conduct and promote a public offering of digital assets, as well as request the admission of a digital asset for the purpose of selling or trading it on an exchange or trading platform, whether centralized or decentralized. These activities are allowed as long as the entity complies with at least one of the following conditions:

1. It is domiciled in El Salvador;
2. Is not domiciled in El Salvador but uses an exchange or trading platform that is domiciled in the country;
3. Is not domiciled in El Salvador, but has the purpose of promoting or making a public offering of digital assets to potential acquirers in El Salvador.

In order to be registered as an Issuer, at least one issue must be approved by the National Commission of Digital Assets. The requirements for Issuer and Issuance are:

• Issuer:
  – Comply with the requirements of article 22 of the Law of Issuance of Digital Assets in relation to articles 4,12,13,20 and 22 of the Regulation of Registration of Public and Private Issuances.
• Issuance:
  – Comply with the requirements set forth in Article 5 of the Public and Private Issuance Registration Regulations.
  – Relevant Information Document pursuant to articles 8 and 10, as well as Annex A of the Public and Private Issuance Registry Regulation.
  – Submit Report issued by a Certifier duly registered before the National Commission of Digital Assets, complying with the requirements set forth in articles 26 to 28 of the Law of Issuance of Digital Assets in relation to articles 5 and 6 of the Public and Private Issuance Registry Regulation.

For more information: click here.

The National Commission of Digital Assets makes available to all interested parties its communication channels to provide information. You can contact us via email info@cnad.gob.sv and phone +503 2224-0942, we are available to answer any questions you have about our services and activities related to digital assets.