Approval of Investment Banking Law in El Salvador
Rafael Burgos and Laura Hernández, experts on Banking and Finance from ARIAS El Salvador, share this article on the new Investment Banking Act that contains the legal provisions regulating the operation of investment banks, their incorporation and limitations, as well as the parameters for qualifying as a Sophisticated Investor.
As part of the government's strategy to promote the bitcoin ecosystem, in August of this year, the Legislative Assembly of El Salvador approved the Investment Banks Law, which aims to regulate financial intermediation and the operations of investment banks, understood as those institutions that regularly operate in the financial market and are able to carry out transactions and provide services exclusively to sophisticated investors. The law aims to regulate these activities to ensure transparency, trust, and agility.
Investment banks will be incorporated as fixed-capital companies, with an indefinite term, domiciled in El Salvador, with a minimum of two shareholders, and will have the exclusive right to use the term "Investment Bank” in their corporate name. They must have a minimum capital of US$50,000,000.00.
Investment banks aim to promote economic development, attract large-scale capital, and strengthen the country's international competitiveness. They will be authorized to conduct transactions exclusively with sophisticated investors.
In accordance with the Law, for a natural or legal person to be classified as a Sophisticated Investor, the following requirements must be met:
- Knowledge and experience: proven knowledge and experience in investments and/or financial transactions, including the risks involved.
- Risk assessment capacity: ability to assess the risks and results of their investments.
- Financial capacity: sufficient financial resources to assume the risks and potential losses arising from transactions carried out on their behalf.
- Liquidity: free disposal of at least US$250,000, consisting of: (i) legal tender, or (ii) readily marketable assets.
They must also comply with a qualification process established by the Investment Bank to confirm their knowledge and understanding of the terms and operation of the services they receive.
Investment banks can carry out traditional financial transactions (passive and active transactions) and can also carry out transactions related to digital assets (with special authorization), such as:
- Acting as digital asset service providers, digital asset issuers, and Bitcoin service providers, in accordance with the Digital Asset Issuance Act and the Bitcoin Act.
- Purchasing financial products and easily liquidated assets.
- Providing financing in bitcoins or stablecoins.
- Managing investments, hedges, and derivatives in stablecoins.
- Carrying out investment transactions in bitcoins or other digital assets, including:
- Custody services with remuneration; or
- Intermediation of digital assets during the custody period under a mandated contract.
- Enable the issuance and trading of tokenized and digital assets.
Legislative Decree No. 376, which approved the Investment Banks Law, has already been approved by the President of the Republic and published in the Official Gazette on August 11, 2025.
The information provided by ARIAS® is presented for informational purposes only. This information is not legal advice and is not intended to create, and does not constitute, an attorney-client relationship. Readers should not act upon this information without seeking advice from professional advisers.