On September 7, 2021, the Bitcoin Law (hereinafter the "Law") came into force in El Salvador, regulating bitcoin as an unrestricted legal tender with unlimited releasing power in any transaction. One of the main challenges when implementing a cryptocurrency as legal tender to be used as a payment method is to ensure the access of users and suppliers to the necessary technological platforms that enable the operational use of a digital currency. In order to satisfy this need, Bitcoin Service Providers (hereinafter "Providers") exist, defined in the Bitcoin Law Regulations (hereinafter the "Regulations") as: any natural or legal person that provides for itself or for third parties bitcoin-related services such as, but not limited to, custodians, exchanges and payment processors or wallets (hereinafter the "Services").

According to our legislation, the State of El Salvador shall provide alternatives that allow users and suppliers to carry out transactions in bitcoin, as well as to have automatic and instantaneous convertibility of bitcoin to dollars when required by the user or economic agent. The above, without prejudice of any private actions, enabling any natural or legal person, who complies with the requirements set forth in the Law and the Regulations, to provide the Services in El Salvador (regardless of whether they are domiciled or not). Likewise, according to regulation NRP-29, issued by the Central Reserve Bank of El Salvador, financial entities are authorized to provide services to their clients, either directly or through a Provider, as long as such entities comply with the special provisions established in the aforementioned regulation.

The minimum requirements that a Provider must comply with to operate in El Salvador are:

  1. To be registered in the Registry of Bitcoin Service Providers kept by the Central Reserve Bank of El Salvador for such purposes.
  2. Comply with the standards of conduct established in the Regulations.

Compliance with these requirements will be supervised by the Superintendence of Finance, being fully empowered to impose sanctions to those Providers that operate in the Salvadoran territory and do not comply with the minimum requirements established by the Law and the Regulations. This sanctioning regime is applicable only to Providers and not to users or economic agents.

Considering the above, it will be at the discretion of each economic agent, based on the corresponding internal analysis, to determine the mechanism to be adopted in order to offer Services to its customers, and therefore accept bitcoin as a form of payment in compliance with Article 7 of the Law. To comply with such obligation, economic agents may: i) Become a Provider to directly render the Services and/or ii) Hire a Provider.

Hire a third party Provider.

Considering the technological aspects inherent to cryptocurrencies, there are different Services that an economic agent must have access to in order to operate with bitcoin transactions. Therefore, it will be necessary to have the necessary technological platforms and specialized technical personnel to operate such platforms for the provision of the Services. This implies a previous development of the software/hardware on which the mentioned technological platforms will be implemented, in addition to having the necessary technical knowledge to achieve this task.

Considering the above, third party Providers offer an efficient access point so that people can operate with cryptocurrency transactions through the contracting of their services. The above becomes an attractive proposition for economic agents, considering that it enables them to provide Services to their clients without the need to make the required technological implementations, hire the corresponding technical personnel, provide a support center for users, comply with the standards of conduct established in the Regulations and submit to the established registrations/ regulatory provisions.

Become a Provider for its own business.

According to the Regulation, the definition of Providers includes natural or legal persons that provide the Services for themselves. In that sense, in case an economic agent chooses to render the Services to its clients on its own account, in addition to carrying out the corresponding technological implementation, it must comply with all the requirements to operate as a Provider in El Salvador.

Anyone who decides to render the Services directly will have complete control of the quality and security of the sensitive information derived from the transactions made in bitcoin as well as the assets in bitcoin that these persons may have.

In conclusion, it is evident that bitcoin service providers will play a key and essential role in the effective adoption of bitcoin as legal tender in the country, by facilitating access to the necessary technology to carry out commercial transactions using such currency.