Crypto Regulations in El-Salvador 2025 : First Country to Use Bitcoin as Legal Tender

El Salvador made history in 2021 as the first nation to adopt Bitcoin as legal tender. By 2025, the country has shifted toward a more regulated and voluntary framework for cryptocurrency, balancing innovation with international financial obligations and domestic realities.

El Salvador Crypto Regulation 2025: Major Developments Timeline

August 8, 2025- Announcement on Bitcoin Banks

• The National Assembly has passed the Investment Banking Law, allowing large financial institutions to provide services denominated in Bitcoin and other digital assets to qualified investors.

• Only institutions with over $50 million in capital can become an investment bank and apply for crypto licenses.
• These investment banks will be permitted to work with “sophisticated investors”, defined as those holding more than US$250,000 (AU$383,700) in liquid assets.

July 30, 2025 – “National Commission of Digital Assets (CNAD) of El Salvador Signs Memorandum with Bolivia” 

• The Central Bank of Bolivia (BCB) and CNAD agreement covers a broad range of crypto policies, including blockchain intelligence tools, regulatory frameworks, and risk analysis models.

• The cooperation aims to increase cryptocurrency adoption and financial modernization in both countries. It is effective immediately and has no expiration.

June 12, 2025 – “El Salvador Accountability Act of 2025” (S. 2058)

• Reports required on— the amount of funds, list of crypto exchanges, location of crypto deposits, and information of individuals who have access to crypto, in El Salvador.

• It also mandates the U.S. Secretary of State to deliver a comprehensive report on cryptocurrency as a vector for the Bukele regime’s corruption

April 22, 2025: Discussion on Approaches to Address Issues in Crypto Regulation 

• Officials like– Crypto Task Force Staff met with representatives from Perkin Law Firm, LLC, and the El Salvador National Commission on Digital Assets, as well as Heather Shemilt, Retired Goldman Sachs Partner, joined a meeting to discuss the resolution of crypto-related issues.

March 2025: New Regulatory Framework Comes Into Effect

• Marks the official beginning of El Salvador’s regulated crypto era.
  
• The focus shifts from mandated usage to voluntary adoption and compliance.

February 2025: New Amendments Rolled Out

• Bitcoin use in paying taxes and government fees was banned.
  
• The state is no longer obligated to support Bitcoin transactions.
  
• Bitcoin remains voluntary legal tender, i.e., permitted but not mandatory.
  

January 2025: Bitcoin Legal Tender Status Revoked

• The Legislative Assembly voted to substantially rescind the Bitcoin Law.
  
• Businesses are no longer legally required to accept Bitcoin.
  
• Government’s official Bitcoin wallet, Chivo, was phased out.

Key Crypto Regulation Milestones in El Salvador

Date	Event/Update
June 2021	Bitcoin Law announced and passed, making BTC legal tender
September 2021	Bitcoin Law takes effect; Chivo wallet launched
2021–2024	Continued government promotion, mining initiatives, and international criticism
December 2024	IMF loan deal agreed, requiring rollback of Bitcoin’s legal tender status

What the Government and Regulators Are Saying

• National Commission for Digital Assets (CNAD): The main regulatory authority, CNAD oversees licensing, compliance, and enforcement for digital assets, aiming to foster innovation while ensuring financial integrity.
• Central Reserve Bank (BCR): Supervises crypto activities, enforces anti-money laundering (AML) and counter-terrorism financing (CTF) standards, and registers Bitcoin service providers.
• Government Position: President Bukele and regulators emphasize building a transparent, compliant, and internationally connected crypto ecosystem, even as direct state involvement in Bitcoin is reduced.

What Is The Government Doing to Avoid Crypto Attacks?

After August 2025, the  National Bitcoin Office (ONBTC) split approximately 6,274 BTC (around $678 million at publication time) from one address into 14 fresh addresses. This move aims to reduce its exposure to potential future quantum computing attacks. Each wallet holds up to 500 BTC, a “shard and spread” approach to limit losses if any single address were ever compromised.

Crypto Tax 2025

• For Investors/Traders: No capital gains tax on Bitcoin transactions, making El Salvador highly attractive for individual crypto investors.
• For Crypto Companies: Firms benefit from substantial tax exemptions, especially if revenue is generated outside El Salvador. However, compliance with AML, KYC, and reporting standards is mandatory.
• Reporting: Both individuals and companies must maintain records and report to CNAD and the Ministry of Finance as part of annual financial statements.

Crypto License in El Salvador 2025

To obtain a crypto license in El Salvador, entities are required to appoint a compliance officer and cybersecurity personnel to review the AML/KYC compliance. The licenses are granted by the National Commission of Digital Assets (CNAD). 

Two types of licensing:

• Bitcoin Service Provider (BSP) license for Bitcoin-related services
• Digital Asset Service Provider (DASP) license for services involving other cryptocurrencies.
• Digital asset issuer

Now with the new law, financial institutions can become crypto investment banks with a Digital Asset Service Provider (PSAD) license. Only institutions with over $50 million in capital can become an investment bank, while the services are limited to investors with over $250,000 in liquid assets. 

Crypto Adoption Rate in El Salvador

• Public adoption remains low, with user penetration at 3.34% in early 2025. The number of active users is expected to reach over 214,000 by year-end, but most Salvadorans do not use Bitcoin for daily transactions.
• The government is working on new initiatives to boost crypto utility and public perception.

Country’s Government Crypto Holdings

• As of 2025, the Salvadoran government holds approximately holds over 6,313.18 BTC, worth around $702 million, with continued purchases planned despite the policy rollback. However, on July 24, the IMF claims that the country has been moving coins between wallets, and not actually buying more Bitcoins.
• These holdings are managed as part of the Strategic Bitcoin Reserve Fund.

Crypto Mining in El Salvador

• El Salvador has promoted Bitcoin mining using geothermal energy from volcanoes, positioning itself as a pioneer in sustainable crypto mining.
• The state-owned geothermal company LaGeo operates mining facilities powered by 100% clean, emission-free volcanic energy, with a capacity of up to 95 MW5.
• In Q1 2025, Bitfinex Securities announced plans to launch the Blockstream Mining Note 2 (BMN2) in El Salvador, further expanding institutional mining activities in the country.
• The government continues to support mining as part of its broader digital assets strategy, leveraging renewable resources to attract global investment and innovation.

Conclusion

El Salvador’s approach to cryptocurrency in 2025 is defined by regulatory maturity and strategic adaptation. While Bitcoin is no longer mandatory as legal tender, the government maintains a crypto-friendly, tax-exempt environment and continues to invest in both Bitcoin holdings and sustainable mining initiatives. The regulatory focus has shifted to compliance, transparency, and international cooperation, positioning El Salvador as a unique hub for digital asset innovation in Latin America.

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