Key Takeaways:
- Panama plans to legalize voluntary crypto payments in commercial transactions.
- The bill establishes a regulatory regime for Virtual Asset Service Providers (VASPs).
- The potential of blockchain integration for state process optimization is also in consideration.
This ambitious piece of legislation aims to clarify the legal status of digital assets, create licensing requirements for service providers, and codify compliance obligations in line with global financial standards. If passed, this bill would position Panama alongside El Salvador, Brazil, and other nations that have already adopted cryptocurrency regulations.
Panama is set to introduce a comprehensive draft bill this month, taking a big step forward in its mission to regulate cryptocurrency and promote the development of blockchain technology.
Table of Contents
Legalizing Voluntary Digital Payments: Panama Pushes for Crypto Adoption
The crux of the proposed bill is the legal recognition of digital assets as a lawful payment method. This gives individuals and businesses the potential freedom to mutually decide to accept cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), and stablecoins — whether to buy goods or pay off debts. This includes potential for leveraging digital assets in commercial and civil contracts, paving the way for fresh opportunities of financial flexibility and innovation.
This model of voluntary acceptance is critical. The bill makes it clear that withholding adoption does not amount to forced adoption, leaving cryptocurrency use as an agreed upon matter between parties. Substitute Representative Gabriel Solis stated that they were not talking about the future but rather about the present. He explained that through the law, they wanted to establish a regulatory framework for the development of these technologies and aimed to provide legal certainty and transparency.
Consider a tourist in Panama City who can seamlessly pay for their cup of coffee or taxi ride using Bitcoin for a vendor willing to accept it. This would be a major win for the country, significantly increasing its attractiveness to the growing global crypto scene. Such measures would significantly enhance Panama’s economy and increase its appeal to international companies.
Virtual Asset Service Providers: How To Keep Panama’s Crypto Market Secure
The bill lays out a regulatory framework for VASPs — virtual asset service providers, including wallets, exchanges and custody platforms — to facilitate safe and responsible use of digital assets. Such entities would also be obligated to register with the Financial Analysis Unit (UAF), a national database, and obtain relevant approval before providing their services in Panama. The bill also seeks to establish a new entity dedicated to supervising VASPs and ensuring regulatory compliance.
Additionally, the bill requires strict adherence to Know-Your-Customer (KYC) and anti-money laundering (AML) guidelines as per the Financial Action Task Force (FATF) recommendations. Entities that do not comply may face administrative sanctions or criminal penalties.
The framework is designed to safeguard consumers and limit the potential for criminals to use cryptocurrencies. It also reassures former President Laurentino Cortizo, who partially vetoed a previous crypto law in 2022, over unresolved money laundering questions. Regulatory gaps and potential constitutional inconsistencies were behind Cortizo’s veto, which the new draft seeks to address by providing greater clarity on the role of regulatory bodies. The new draft clarifies the functions of the regulatory authorities involved, including those of the UAF and the Superintendency of Banks of Panama (the regulatory entity of the financial sector) to prevent this risk.
Blockchain Innovation in Panama: Revolutionizing Governance and Digital Identity
The proposed bill promotes the use of blockchain technology in public administration while also establishing regulations for financial activities. The law includes provisions for digital identity systems and the issuance of tokenized securities, aimed at reducing bureaucratic inefficiencies and improving transparency in the public and private sectors.
Blockchain technology can be used to improve the property registry system, validate public documents, facilitate tax payments, and manage the issuance of official documents, resulting in a highly efficient and transparent system of government services.
The law also recognizes smart contracts, stating they are deemed enforceable under Panamanian law. This can empower new financial products and automate business processes via programmable contracts. For instance, a local Panamanian company could use a smart contract to automate its supply chain payments so that it would pay vendors on delivery and in a transparent process. The bill aims to encourage crypto-linked companies by offering them tax incentives, which may further flourish investment and innovation in the country’s digital asset space.
The preliminary bill is expected to have committee discussions in the National Assembly in the next weeks. To be sure, amendments are possible, and interpretation will vary, but the fundamental tenets of voluntary acceptance of cryptocurrency, regulation of virtual asset service providers (VASPs), and integration of blockchain into state processes will probably continue as such. If passed, Panama’s ambitious crypto legislation is set to reshape the country’s financial landscape and cement its position as a forward-looking nation in the digital era.
