El Salvador Drafting New Digital Asset Issuance Law

• The new law would make it easier to do business with any cryptocurrency.
• A document posted on the El Salvadoran National Assembly’s website reveals details.

In spite of the current cryptocurrency market downturn, El Salvador is increasing its wagers on the investment market. The first government to recognize Bitcoin as legal cash is currently drafting a Digital Asset Issuance Law. That would make it easier to do business with any cryptocurrency.

A document posted on the El Salvadoran National Assembly’s website claims that the law’s goal is to “promote the efficient development of the digital asset market and protect the interests of acquirers” via the regulation of transfer operations for any digital asset.

Digital Asset Classified

The legislation is unusual because it creates a specialized regulatory framework for crypto assets by isolating them from traditional assets and financial instruments. The law is quite clear on this point, in order for a digital asset to be classified as one, it must use a distributed ledger or a technology that is functionally equivalent to one. With regard to distributed ledger technologies, the blockchain is now among the most well-known.

Moreover, transactions involving CBDCs, which are fiat currencies regulated by each country’s financial guidelines, assets not able to qualify for trading or exchange, assets with limited transactions (such as securities), and sovereign assets regulated by foreign law are not permitted within the framework of the law.

In June of 2021, President Bukele presented the now-famous Bitcoin Law to Congress. A majority of the National Assembly’s pro-government parties voted in favor of it only a few hours later. If this is any indication, the new legislation will probably be rushed into effect.