El Salvador Proposes Cross-Border Tokenization Sandbox to SEC
El Salvador has proposed a cross-border regulatory sandbox focused on tokenization to the U.S. Securities and Exchange Commission (SEC). The initiative, discussed on April 22, involves a collaboration between U.S. and Salvadoran officials, aiming to provide real-world data on token classification and broker-dealer roles. The project would see a U.S.-licensed broker working with a Salvadoran tokenization firm on two small-scale pilots: one for real estate tokenization and another for token-based capital raising. Each scenario would involve a limited capital commitment of $10,000.
The goal of this sandbox is to generate practical data for the SEC on token classification, custody solutions, and how digital assets might fit within U.S. regulatory frameworks without triggering full securities treatment. This initiative aligns with several policy priorities outlined by Commissioner Hester Peirce, including alternative offering models and regulatory clarity for broker-dealers. If accepted, the pilot would serve as a live case study to inform future rulemaking.
Ask Aime: What is the El Salvador-US regulatory sandbox proposing for tokenization, and how might it affect the U.S. market?
El Salvador’s digital asset agency, the National Commission on Digital Assets (CNAD), would oversee the pilots, drawing on its existing tokenization framework. The CNAD has implemented tokenization projects across various asset classes and developed risk matrices that could inform U.S. approaches. However, a recent review by el Salvador’s Central Reserve Bank indicates that nearly 90% of the country’s registered Bitcoin service providers are now inactive, with just 20 firms remaining operational. This raises doubts about the viability of the legal and commercial frameworks put in place since Bitcoin was adopted as legal tender in 2021.
Despite the decline in Bitcoin services, the state continues to hold over 6,100 BTC and pursues broader tech ambitions, including partnerships around AI and the construction of a “Bitcoin City Airport.” The rapid fade-out of Bitcoin services on the ground suggests a widening gap between the administration’s public vision and market realities. The proposal for the cross-border sandbox represents a strategic effort to leverage El Salvador’s regulatory infrastructure to address these challenges and provide valuable insights for U.S. regulators.
