CNAD Annual Report 2023-2024: From Zero to Global Leaders in the Digital Assets Industry

Surpassing Expectations
IN THE DIGITAL ASSETS INDUSTRY
2023 - 2024
FROM ZERO to
GLOBAL LEADERS
Annual Activity Report 2023-2024 of the National Commission of Digital Assets. El Salvador, Central America.

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48
52

Index
General
02 - 07
Welcome from the President and
Chief Executive Officer of the
National Commission of Digital Assets I Message from the President and Chief Executive Officer Introduction What is the National Commission of Digital Assets? Our successes II Key achievements and successes of the CNAD International recognition of the CNAD: Impact and Global Relevance Successful national defense during the GAFILAT Mutual Evaluation Human Talent III Human talent of the Commission Innovation and continuous training Institutional Projection IV Countries betting on the digital asset ecosystem in El Salvador Global participation and strategic alliances of the Commission in the world of digital assets Our events 10 - 17 20 - 23 26 - 35 V Public Registry Public Registry of the digital asset ecosystem. Statistics of registrations in the National Commission of Digital Assets. 38 - 41 VI Regulatory Framework Regulatory strengths and impact Effective controls in the prevention of money laundering, terrorism financing and proliferation of weapons of mass destruction CNAD Philosophy Board of Directors Organizational structure 44 - 53 06 04 02 10 14 16 20 22 26 31 35 38 40 44

AND CHIEF EXECUTIVE OFFICER OF THE
NATIONAL COMMISSION OF DIGITAL ASSETS MESSAGE FROM THE PRESIDENT PRESIDENT and Chief Executive Officer JUAN CARLOS REYES GARCÍA significant milestones ... we have reached which have positioned us in first place in the American continent and in second place as a global regulator of cryptocurrencies and digital assets. “ “ All success begins with an idea, but it is achieved through hard work. Upon returning to El Salvador to lead the National Commission of Digital Assets, I found an innovative Law, accompanied by some Regulations and files, as well as a recently appointed Director, but it was all the beginning. We started from zero, with the support of the Minister of Economy, Licda. María Luisa Hayem, who provided us with our first space and resources. Thanks to our allies and collaborators, we worked long hours to support this project strategic project of our President. To all of them, thank you very much for being part of this journey. Thus began our start. Message from the President Annual Report 2024 brightest minds in the country At CNAD, we are proud to have gathered a group of the The CNAD stands out worldwide due to our regulations, drafted by world-class digital asset experts, and our supervision framework, developed with the assistance of the main traditional financial regulators of importance worldwide. We understand that supervising this industry requires a combination of traditional financial experience and deep knowledge of blockchain technology. As a technological and financial regulator, the CNAD is in a unique position to navigate the complexities of the digital era. Our role extends beyond financial supervision to include the regulation of technological innovations that underpin the ecosystem of digital assets. This dual approach ensures that we maintain the integrity of the system financial and at the same time we foster innovation and technological advancement. Our team, supported by experts from the industry global, is firmly committed to the success of our nation. As reflected in our annual report, our young and talented team has excelled thanks to its practical approach, driving our mission with great determination. and join us to celebrate the progress we have achieved in shaping the future of digital assets. explore our achievements We invite you 2 3 Our existence and our achievements have their roots in the transformative Bitcoin Law. At recognizing the need to innovate and fully leverage this financial revolution, the President Nayib Bukele established an independent financial regulator to unite the integrity of traditional finance with the innovative potential of blockchain technology. We are the first in the world to have and adopt this clear focus. In this my first year, we have reached significant milestones that have positioned us in the first place in the American continent and in second place as a global regulator of cryptocurrencies and digital assets, driving innovation and establishing high standards for this
inclusive and digital financial sector.

Introduction Annual Report 2024
INTRODUCTION
“We have built an ecosystem of digital assets that before did not exist in El Salvador” “ In September 2024 we celebrated a first year of successes of the management of the Board of Directors 2023-2028, led by Juan Carlos Reyes García as President of the CNAD. And we have a lot to celbrate. From their first day and starting from scratch, together with the managing directors Miguel Serafín and César Córdova, we have built a digital asset ecosystem that did not exist before in El Salvador. Likewise, he has implemented his vision to organize and constitute the best regulatory and supervisory entity for digital assets in the world, with which to create world-class regulations to regulate and supervise the industry with a risk-based approach aligned with international best practices. We also have more than 30 supervised entities registered in our public registry, and a long waiting list of others that seek authorization to operate, which evidences the genuine interest to operate in El Salvador and the confidence that the CNAD radiates as arbiter of the rules of the game. as far as regulatory framework and digital asset market UNPRECEDENTED ACHIEVEMENTS and SUCCESS in El Salvador” “The eyes of the world are now on “ The mission entrusted to the CNAD, and the legacy that this Board of Directors will leave is that of a pioneering institution in the world, with a Salvadoran ecosystem of digital assets strengthened through the creation of the most complete and specialized team of regulation and supervision of the environment, the better legislation favorable to the development of the industry, with adequate measures to enforce the law, attract and protect the investor and the end user. Success History of El Salvador is one of the leading countries worldwide in tokenization of real world assets, with more than... It is to promote the stability and security of the market, ensure the competitiveness of El Salvador in this industry and guarantee the leadership position of our country in the world. Our legacy Our objective in digital asset issuances, consolidating itself as a reference in the adoption and regulation of tokenizations that have a real underlying asset. 5 billion approved dollars 4 5

OF DIGITAL
ASSETS?
WHAT IS THE NATIONAL COMMISSION
The National Commission of Digital Assets (CNAD) is the first regulator and supervisor at worldwide level of digital asset service providers and participants in the ecosystem in the Republic of El Salvador. It plays a key role in the transformation digital and economic of our country and supports the growth of the ecosystem of digital assets with the strategic vision of our Board of Directors that combines a solid corporate governance, visionary leadership and a technological approach in each of the management areas. “ integrity, the transparency, and in the premise corporate governance philosophy of our is based on the don’t trust, verify (don't just trust, verify it) and accountability. We have built a solid foundation to guarantee that each of our steps is aligned with the highest international standards. Our goal is not just to regulate, but also to lead with a vision of future, driving innovation and progress at all levels of our digital economy. National Commission of Digital Assets Annual Report 2024 Economic Development The Commission is the engine that drives a new model of for El Salvador. knowledge, leadership and action We invest in the training and formation of our teams, ensuring that the Commission is always a reference of in the field of digital assets. Our institutional growth perspective is deeply rooted in a commitment to excellence and the development of talent. We believe that a strong institution is not measured only by its present achievements, but by its ability to adapt and prosper in a changing global environment. The National Commission of Digital Assets of El Salvador, is also the engine that drives a new model of economic development, where effective governance, leadership transformative, and the power of technology are combined to create a bright future for our country. Success History of We generate conditions for the attraction of new foreign investments: Global companies of note such as Bitfinex, Tether, Binance and, recently Valereum, (formerly owners of the Gibraltar Stock Exchange), have decided to register and work in El Salvador. This movement reflects the confidence and security that the favorable climate of investment in the country offers to the ecosystem of digital assets. “ “ “ 6 7

II. Our Successes

5 billion
Key achievements and successes of the CNAD Annual Report 2024 El Salvador is one of the leading countries worldwide in tokenization of real world assets, with more than... The CNAD has been recognized as the regulator of digital assets... The CNAD achieved a historic success: defending El Salvador in a process of evaluation by GAFILAT that for the first time included the regulation and supervision of digital assets. In the GAFILAT Final Report praised the CNAD for being the... The National Commission of Digital Assets grounds its success in the excellence of its human capital. CNAD has implemented a recruitment strategy oriente to attract the most outstanding talents in the fields of regulation, finance and blockchain technology. This approach has resulted in the formation of a multidisciplinary team of high performance, capable of developing and implementing a innovative and effective regulatory and supervisory framework for the digital assets. FIRST YEAR OF in digital asset issuances, consolidating itself as a reference in the adoption and regulation of tokenizations that have a real underlying asset. dollars approved The regulation of El Salvador is above economic giants such as Japan, Germany, France, Gibraltar, Lithuania, United Arab Emirates, Bahamas and Turkey. surpassed only by Switzerland. 2nd in the world and highlighted its solid approach to controls for the prevention of money laundering and terrorism financing. 1st institution dedicated exclusively to the digital assets CNAD has achieved an extraordinary milestone in the international scenario of digital assets. The tokenization of real world assets has democratized access to high-yield investments. The tokens issued represent a variety of underlying assets, from real estate to future soy projects, offering attractive yields that were previously only available to institutional or high-net-worth investors. This market opening not only diversifies investment options for the average citizen, but also fosters
a more inclusive and dynamic financial environment....
marking a milestone in the democratization of the Salvadoran financial system. including those widely recognized as pioneers in the digital asset industry. This achievement underscores the position vanguard that El Salvador has reached in the field of regulation and development of the crypto asset ecosystem. Among the nations that have requested collaboration or advice from the CNAD, stand out technological and financial powers such as Switzerland, known for its “Crypto Valley”; Gibraltar, leader in blockchain regulation; and Kazakhstan, a hub emerging for cryptocurrency mining. Also include Argentina and Brazil, regional leaders in adoption of financial technologies. The interest of these countries, traditionally at the forefront of financial innovation and regulation of digital assets, makes valid the vision and the focus pioneering of El Salvador. This international recognition not only positions our country as a global strategic center for development and regulation of digital assets, but also opens doors for international collaborations, exchange of knowledge and potential investments. The CNAD continues working to consolidate this leadership position, promoting an innovative, secure and attractive digital asset ecosystem for entities both national and international. Our institution has captured the attention and interest of companies and regulators of... 25 countries SUCCESSES 10 11

We have made significant progress in overcoming the impasse that traditionally exists between the conventional financial industry and the digital asset sector. Unlike many jurisdictions where a regulatory and operational gap persists between these two worlds, our country has established an innovative and complete regulatory framework that acts as an effective bridge. This visionary regulatory approach has catalyzed a integration unprecedented. Thanks to the clarity and robustness of the regulations established by the CNAD, we have witnessed a notable phenomenon: key players in the industry traditional finance are proactively coming to the Commission to request authorizations and enter the digital asset market. Established banks, long-standing financial institutions and other pillars of the conventional financial system are now actively exploring opportunities to operate as issuers or providers of digital asset services. This convergence represents a significant achievement, demonstrating how well-designed regulation can not only coexist with innovation, but also foster the evolution of the financial sector as a whole. El Salvador is thus positioned as a global model of how effective regulation can facilitate the transition and collaboration between the traditional financial world and the emerging ecosystem of digital assets, creating a more integrated, innovative and resilient financial environment. We generate conditions for the attraction of new foreign investments foreign: Global companies of note such as Bitfinex, Tether, Binance and, recently Valereum, (formerly owners of the Gibraltar Stock Exchange), have decided to register and work in El Salvador and thus, seek the regulation of the CNAD. This trend reflects the... The effectiveness of our legal framework and the regulation specific to stablecoins, has generated that the giant Tether, issuer of the stablecoin USDT, with a circulation of 120 trillion dollars, chooses El Salvador for the issuance of new and more innovative stablecoin products, backed by gold custodied in Europe. We have an agile and transparent process for the authorizations in our ecosystem. In public offerings, the evaluation process is completed in a maximum of five business days. As part of the commitment to foster inclusion and innovation, the CNAD has created the Digital Asset Innovation Center, focused on developing technological tools and integrating the educational model to train professionals, such as compliance officers and specialists in digital asset regulation in digital finance. CNAD has developed manuals and standards to perform a rigorous evaluation of platforms that market digital assets with the aim of guaranteeing trust in the digital asset ecosystem and its long-term sustainability. This is something unique in the world, given that the CNAD has specialized teams in technology and finance. The National Commission of Digital Assets (CNAD) adopted a Risk-Based Supervision framework, aligned with the
international best practices, to measure and manage risks in the digital asset industry. This approach allows the CNAD to carry out effective supervision and efficient, strengthening confidence and integrity of the market. We have technical advisory committees with extensive international experience in evaluation and management of financial, technological and compliance risks of the regulatory framework, equipping technical staff with key tools and instruments to create guides and procedures to evaluate the business models of Digital Asset Service Providers. Key achievements and successes of the CNAD Annual Report 2024 trust and security that the favorable climate of investment in the country offers to the ecosystem of digital assets. 12 13

In 2024, El Salvador reached a significant milestone in its trajectory as a pioneer in the regulation of digital assets. COINCUB, a recognized economic analysis firm specialized in cryptocurrencies, distinguished our country as the second worldwide with the most favorable regulation towards cryptoassets. This achievement not only validates the innovative vision of El Salvador, but also highlights the excellence of our regulatory framework. The National Commission of Digital Assets (CNAD) has played a fundamental role in this recognition. The technical quality of the regulation issued and the supervision exercised by the CNAD on the ecosystem of digital assets has transcended borders, demonstrating to the world our capacity and experience to create regulations that foster innovation while maintaining high standards of security and transparency. This international recognition underscores the commitment of El Salvador to the development of a regulatory environment that balances the promotion of technological innovation with the protection of users and the integrity of the financial system. The CNAD continues working to maintain and improve this positioning, consolidating El Salvador as a global reference in the regulation of digital assets and technologies blockchain. Visual reference of the positioning map of El Salvador in the global panorama, regarding regulation of Cryptoassets consolidating itself as a reference in the issuance of regulation in regulation and supervision of digital assets in the region, thus raising credibility and confidence in the ecosystem in El Salvador. international prestige El Salvador has gained a growing recognition and an invaluable International recognition of the CNAD Annual Report 2024 FIRST IN AMERICA and second in the world in matters of regulation of digital assets 14 15

The National Commission of Digital Assets (CNAD) has demonstrated its excellence and commitment in the field of regulation of digital assets, which is reflected in a standout manner in the results of the rigorous mutual evaluation carried out by the Financial Action Task Force of Latin America (GAFILAT). This evaluation, known for its complexity and meticulousness, represents a crucial milestone for any GAFILAT member country. The process implies an exhaustive scrutiny of the national systems for the prevention and combating of money laundering and terrorism financing (AML/CFT), covering legal, operational and aspects of effectiveness in the implementation of international standards. The evaluation team, composed of experts from Costa Rica, Guatemala, Nicaragua, Panama, Uruguay and the Dominican Republic, carried out a deep analysis of the measures implemented by El Salvador. In this context, the CNAD emerged as a key actor, receiving a special recognition for its innovative tools and activities effective in the prevention of AML/CFT in the digital asset sector. The importance of obtaining favorable grades in this evaluation cannot be underestimated. These grades not only validate the effectiveness of our policies and regulatory practices, but also strengthen the international reputation of El Salvador as a safe and reliable destination for investments in the digital asset sector. In addition, good grades in the GAFILAT evaluation facilitate international financial relations and improve the perception of the country in global economic forums. The report issued by the evaluation team specifically highlights the role of the CNAD, recognizing its efforts in the development and implementation of effective mechanisms to comply with the international standards for the prevention of AML/CFT in the innovative and complex field of digital assets. This recognition not only validates the work of the CNAD, but also positions El Salvador as a regional reference in the responsible regulation of new technological financial technologies. Successful national defense during the GAFILAT Mutual Evaluation Annual Report 2024 Successful participation of the CNAD in defense of the country on compliance with FATF standards in digital assets “ of recent creation “...the CNAD, despite being an entity has shown important efforts regarding the identification of sector risks PSAD…” (January 2023) “ dedicated exclusively to regulating and supervising digital assets, which manages to successfully overcome an evaluation based on FATF standards. WORLD LEVEL The CNAD is the first regulator at 16 17

III. Human Talent

Human talent of the Commission Annual Report 2024 HUMAN TALENT Our president Juan Carlos Reyes García, with his dual Salvadoran and Canadian training, brings an invaluable international perspective to our institution. His solid academic background, which includes a master's degree from Harvard University and degrees in computer science and mathematics, gives him a deep understanding of the complexities technical and financial inherent in digital assets. Under his direction, the CNAD has implemented a recruitment strategy oriente to attract the most outstanding talents in the fields of regulation, finance and blockchain technology. The vision of our president has been fundamental to establish El Salvador as a reference in the regulation of digital assets. His leadership has fostered an organizational culture that values innovation, technical excellence and adaptability in a financial landscape in constant evolution. Our president maintains a firm commitment to creating the best team worldwide in the field of digital assets, an objective that goes beyond words and is translated into concrete and quantifiable actions. Recognizing that continuous education is paramount to maintaining this leadership, the CNAD has implemented a program