El Salvador proposes a cross-border crypto sandbox with the U.S. SEC for testing new rules.

Two pilot projects will test real estate tokens and fundraising with digital shares in El Salvador.

El Salvador's proposal to the U.S. SEC for a cross-border crypto sandbox was met with interest but no immediate commitment from the regulator, according to a report by Law360 on April 24.

The proposal was presented during a meeting on April 22, which included representatives from El Salvador's National Commission on Digital Assets (CNAD), U.S. law firm Perkins Law, and former Goldman Sachs partner Heather Shemilt. Together, they pitched the idea of a cross-border sandbox to test new crypto projects and develop joint regulatory frameworks.

The proposal focused on two small-scale pilot programs that could be launched quickly. The first program would involve a U.S.-licensed real estate broker obtaining a special license in El Salvador to sell small shares of commercial real estate, with each investor limited to a maximum of $10,000 in unrated units. This program would test the cross-border trading of real estate tokens and experiment with different approaches to classifying them—either as regular securities or a new class of digital assets.

The second pilot project would enable a small business in El Salvador to raise funds through the sale of digital shares to U.S. employees of the business, again with a cap of $10,000 per investor. This project would examine the intersection of U.S. crowdfunding rules and this new type of tokenized fundraising.

This initiative aligns with previous statements by SEC Commissioner Hester Peirce, who has advocated for cross-border cooperation and a willingness to experiment with new regulatory models for crypto. El Salvador has been at the forefront of testing new digital tools and has already developed a framework for managing risk in the crypto ecosystem.

However, despite El Salvador's efforts to foster a vibrant ecosystem for crypto startups and projects, recent data from the Central Reserve Bank indicate a decline in the use of Bitcoin in the country. Only 20 Bitcoin service firms are still operating, down from 181 when Bitcoin became legal tender in 2021. Currently, El Salvador's bitcoin holdings are valued at $6,089, while the government continues to pursue high-tech projects, such as Bitcoin City Airport and new AI partnerships with Israel.

If the SEC grants approval for the sandbox plan, it could serve as a testing ground for developing clearer and more effective crypto regulations. This collaboration could also pave the way for closer cooperation between the U.S. and El Salvador in exploring new frontiers of digital money.