EL SALVADOR SETS NEW STANDARD FOR CRYPTO REGULATION: UNDERSTANDING THE KYC REQUIREMENTS FOR BUSINESSES
El Salvador’s bold move to recognize Bitcoin as a legal tender has sent shockwaves throughout the global financial community, making it an attractive hub for cryptocurrency-related activities. The country’s Digital Asset Issuance Law (DAI Law) has created a favorable environment for blockchain startups and businesses, offering tax incentives and facilitating access to banking services.
However, with this increased popularity comes the need for robust regulations to ensure transparency and prevent financial crimes. As part of its regulatory framework, El Salvador requires businesses operating within its borders to comply with Know Your Customer (KYC) requirements.
TYPES OF CRYPTO LICENSES IN EL SALVADOR
El Salvador offers two types of crypto licenses: Bitcoin Service Provider (BSP) License and Digital Asset Service Provider (DASP) License.
1. Bitcoin Service Provider (BSP) License
This license is required for businesses that provide various Bitcoin-related services, such as:
- Exchanging Bitcoins for fiat money
- Making payments in Bitcoins
- Storing Bitcoins on behalf of clients
2. Digital Asset Service Provider (DASP) License
This license is required for businesses that provide a variety of services related to other cryptocurrencies.
KYC REQUIREMENTS FOR DASPs
To obtain a DASP license, businesses must comply with the following KYC requirements:
- Provide and maintain accurate customer information
- Conduct thorough risk assessments on customers
- Implement effective anti-money laundering (AML) measures
- Maintain detailed records of all transactions
- Ensure that all employees handling customer data are properly trained
BENEFITS OF OBTAINING A CRYPTO LICENSE IN EL SALVADOR
Obtaining a Crypto License in El Salvador offers numerous benefits, including:
- Tax incentives for cryptocurrency-related activities
- Access to banking services and financial institutions
- Increased credibility and trust among customers
- Ability to operate within a regulated environment
- Opportunities for growth and expansion into new markets
FORMATION OF LIMITED LIABILITY COMPANIES (SRLs)
Businesses interested in registering in El Salvador generally choose Limited Liability Companies (SRLs) as their legal structure. The formation of SRLs is regulated by the El Salvador Commercial Code, and the necessary steps include:
- Choosing a company name and registering it with the Commercial Registry
- Preparing documents, including copies of passports and proof of physical address
- Submitting an application for registration to the Commercial Registry
- Opening a corporate account parallel to registration
- Obtaining additional registrations with public authorities
CONCLUSION
El Salvador’s innovative approach to cryptocurrency regulation has made it an attractive destination for businesses looking to participate in the digital financial landscape. By understanding the KYC requirements and benefits of obtaining a Crypto License, entrepreneurs and businesses can navigate the regulatory framework and capitalize on the opportunities available in El Salvador.
Author: Valeriia Ukolova, Lawyer at Manimama Legal&Growth Agency