New Legislation Introduced in Panama to Turn the Country into a Crypto Hub
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.
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.
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. Unlike El Salvador’s mandatory Bitcoin adoption policy, Panama’s approach gives businesses and individuals the flexibility to adopt crypto at their own pace, potentially leading to smoother integration into the economy. 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.
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. This entity will likely play a key role in monitoring exchanges and preventing illicit activities, ensuring that Panama’s crypto market remains both dynamic and secure.
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. By implementing strict compliance measures, Panama aims to strike a balance between fostering financial innovation and preventing illicit activities such as fraud, tax evasion, and money laundering. It reassures former President Laurentino Cortizo, who vetoed a 2022 crypto law over money laundering concerns. The new draft addresses regulatory gaps and clarifies the roles of authorities like the UAF and the Superintendency of Banks to mitigate risks. By setting clear guidelines, the government aims to foster trust among both local and international investors, encouraging long-term growth in the crypto sector.
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 can enhance property registry, validate documents, facilitate tax payments, and streamline government services for greater efficiency and transparency.
The law also recognizes smart contracts, stating they are deemed enforceable under Panamanian law. This could revolutionize sectors like real estate, where property transfers and rental agreements could be executed seamlessly without the need for intermediaries. This can empower new financial products and automate business processes via programmable contracts. The bill incentivizes crypto firms with tax benefits, boosting investment and innovation in digital assets.
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.
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