Panama has introduced legislation to govern the use of cryptocurrencies across the country.
The bill, introduced on Tuesday night by Congressman Gabriel Silva, aims to make Panama a “country compatible with the digital economy, blockchain, crypto assets, and the internet.”
The text proposes that Panamanians or legal entities established in the country may freely agree to accept cryptocurrency as payment for any civil or commercial operation not prohibited by the legal system.
Taxes, fees, and other tax obligations could also be paid with cryptocurrency, according to the project.
According to Silva, the use of cryptocurrencies is not illegal in Panama. Although there is no enforced currency in the Panamanian constitution, the US dollar has been used officially since 1904, when a monetary agreement known as Taft-Arias went into effect.
“There are no certainties in the fiscal rules, and we hope to bring them with this project,” said Felipe Echandi, a local crypto entrepreneur who collaborated with Silva on the bill’s drafting.
According to Echandi, the bill subjects cryptocurrencies to the capital gains regime, as it does in the United States, while exempting them from VAT. “We believe this is a global trend,” he stated.
The proposed legislation also aims to establish banking interoperability principles so that traditional financial systems can coexist with new ones. In Silva’s words, this would imply the ability to link a bank account to an exchange.
“Today, you can’t even link a bank account to PayPal,” Silva explained.
According to Echandi, the bill’s goal is to ensure that crypto is not only used by two parties who have a contract, but that conditions are created so that it can be used widely, such as in a local store.
According to a draft of the bill, the project aims to “expand the digitalization of the state” through the use of distributed ledger technology by digitizing the identity of individuals and legal entities, in addition to regulating cryptocurrencies.
The bill states that the digitization process will enable Panama to be compatible with smart contracts and DAOs (decentralized autonomous organizations). “As Estonia has done with its digital residency program, the country has all the potential to be a digital identity provider for the rest of the world,” it adds.
“The most far-fetched vision is that Panama becomes a DAO,” Echandi said, adding that the bill is a first step toward that goal.
According to Echandi, the bill aims to strengthen the country’s crypto ecosystem and encourage the entry of crypto companies.
“While acquiring or purchasing cryptocurrencies is not currently illegal, there are not many exchanges or platforms to convert from fiat to crypto or vice versa,” he added.
Furthermore, the proposed legislation allows issuers of securities to represent those releases using distributed ledger technology, blockchain, or cryptocurrencies.
As Panama has become a financial hub in recent years, Echandi believes that with this bill, the country could become a desirable jurisdiction for companies seeking to issue any type of asset.
Silva, a member of the independent and opposition party Bancada Independiente, stated that both the ruling and opposition benches are willing to deal with the bill. In the last two months, he met with various public institutions involved in the operation of cryptocurrency, including the Ministry of Finance, the National Bank, and the Superintendency of Banks, he said.
According to Silva, the project received feedback from a variety of sources, including lawyers, bitcoin users, crypto-related businesses, and government officials.
The deputy told us in June that he planned to introduce the bill in July, but that it had been delayed due to the collection of comments from various parties.