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El Salvador’s National Commission on Digital Assets (CNAD), in collaboration with U.S. law firm Perkin Law Firm and former Goldman Sachs partner Heather Shemilt, has proposed a groundbreaking cross-border crypto regulatory sandbox to the U.S. Securities and Exchange Commission (SEC). The initiative aims to strengthen regulatory frameworks by providing real-time data and insights from regulated digital asset activities in El Salvador.

Overview of the Crypto Regulatory Sandbox

The proposal, discussed during an SEC Crypto Task Force meeting on April 22, seeks to create a collaborative environment where U.S. and Salvadoran regulators can jointly observe small-scale tokenization projects. This initiative leverages El Salvador’s evolving digital asset regime, which has undergone significant development over the past five years.

CNAD has already established a comprehensive risk matrix and regulatory model through live tokenization experiments, especially in the real estate sector. These efforts have successfully attracted the attention of global players in the blockchain and cryptocurrency industries.

Two Pilot Programs Proposed

1. Real Estate Tokenization Platform

The first pilot program involves a U.S.-licensed broker acquiring a limited-scope digital asset license from CNAD to launch a real estate tokenization platform. This platform would allow investors to purchase fractional shares in Salvadoran properties. Each investment scenario would be capped at $10,000 per investor.

This initiative aims to gather insights on key aspects such as investor protection, secondary trading of digital assets, and the regulatory classification of certain tokens as “non-securities.”

2. Tokenized Capital Raising for Small Businesses

The second pilot program focuses on tokenized capital raising. A small Salvadoran business would raise funds through tokenized equity offerings, also capped at $10,000 per scenario. The goal is to evaluate how these offerings compare to existing U.S. crowdfunding regulations and to potentially shape future SEC guidance.

Key Players Behind the Proposal

The team spearheading this initiative includes Erica Perkin, a blockchain-trained attorney and advisor to CNAD; Juan Carlos Reyes, the president of CNAD; and Carmen Elena Ochoa de Medina, a former financial regulator specializing in tokenization. A U.S. broker will also be selected with SEC input to ensure compliance with U.S. regulatory standards.

Alignment with SEC Priorities

The proposed sandbox aligns with the SEC’s broader goals, as outlined in Commissioner Hester Peirce’s crypto policy statement. These priorities include cross-border collaboration, broker-dealer regulation, custody standards, and the treatment of coin and token offerings. By addressing these areas, the sandbox could serve as a model for future regulatory frameworks in the U.S. and beyond.

What This Means for Crypto Regulation

This collaborative effort between El Salvador and the United States represents a significant step toward enhancing global crypto regulation. By testing small-scale projects in a controlled environment, regulators can identify potential risks and benefits, ensuring a more informed approach to cryptocurrency oversight.

For those interested in the intersection of cryptocurrencies, investing, and finance, this initiative highlights the growing importance of international cooperation in shaping the future of digital assets.

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