El Salvador is a small country in Central America with a rich history and an economy that has undergone significant changes. In the 20th century, the country’s economy was based on the export of coffee, but the civil war of the 1970s and 1980s caused severe damage, leading to a recession and mass emigration.
After the conflict ended in 1992, the country launched market reformation and privatization. In 2001, El Salvador accepted the U.S. dollar as its official currency, stabilizing inflation but increasing its dependence on external factors.
In 2021, El Salvador became the first state to recognize bitcoin as legal tender. This experiment sparked heated debate worldwide.
Why Did El Salvador Choose Bitcoin?
El Salvador’s economic challenges became the starting point. About 70% of the country’s population doesn’t have bank accounts, and nearly 20% of GDP comes from the money transfers of emigrants from abroad. High transfer fees, dependence on the U.S. dollar, and limited access to financial services forced the government to seek unconventional solutions.
The President of El Salvador, Nayib Bukele, proposed bitcoin as a way to address several issues simultaneously:
- Decrease U.S. dollar dependability – bitcoin use decreases the influence of U.S. monetary politics on El Salvador’s economy.
- Financial affordability – bitcoin provides millions of citizens without banking accounts access to financial services through mobile apps.
- Investment attraction – adopting bitcoin and preferential terms for the crypto business make the country attractive to international investors.
- Reducing remittance costs – bitcoin enables the minimization of fees for money transfers.
- Innovative country image – El Salvador stands out as a state-level cryptocurrency pioneer, attracting the crypto community’s attention.
How Bitcoin Adoption Took Place?
In June 2021, El Salvador’s Parliament accepted the Bitcoin Law, which made bitcoin the official currency alongside the U.S. dollar. To simplify crypto usage, the government launched the state-run wallet application Chivo. Each user of this app received $30 in bitcoin for registration. The state also installed Bitcoin ATMs, and businesses were required to accept crypto as a means of payment. However, companies that didn’t have technical means were exempt.
El Salvador currently issues cryptocurrency licenses. A license from El Salvador allows a company to establish itself as a pioneer in the rapidly evolving digital asset market.
Cryptolicense in El Salvador
After adopting bitcoin, the country established a regulatory framework for licensing crypto platforms, exchanges, and other market participants. In El Salvador, a separate Bitcoin license allows the companies to work exclusively with this cryptocurrency. There is also a Digital Asset Service Provider (DASP) license, which, in contrast, covers a wide range of digital assets and services. Bitcoin and DASP licenses are usually issued simultaneously.
The IT-OFFSHORE team successfully guides the companies during registration and the process of obtaining a crypto license in El Salvador.
Advantages of El Salvador for crypto activities:
- Pioneer reputation in the potentially growing market.
- Taxes – 0%.
- Wide range of crypto-friendly local banks.
- El Salvadorian crypto license has international recognition, which allows businesses to work globally.
The crypto license covers the following types of activity: crypto exchange, custody services, payment processing, negotiate and trade derivatives, token issuance, loans in crypto, NFT issuance & trade, and asset management of crypto assets.
The process is relatively fast. Company registration in El Salvador takes only 5 business days, and the Bitcoin license should be ready in 4 weeks. However, the DASP license might take up to 6 months to prepare.
Launching a business in El Salvador might not be easy because of the complex document requirements and the need to comply with local norms. Hiring an expert can make the process straightforward. The IT-OFFSHORE specialists have experience working in this jurisdiction. We are ready to assist you with prompt company registration and getting a cryptocurrency license.
