Panama Ponders Cryptocurrency Legislation

The Central American country’s banking system could benefit from the use of crypto, analysts say, while urging caution

Panamanians could soon have a U.S. dollar savings account, and another in cryptocurrencies, as is possible in Europe.
March 21, 2022 | 01:45 PM
Reading time: 3 min.

Panama City — Panama’s National Assembly is currently studying a proposed law that would regulate the use of cryptocurrencies in the Central American country.

The bill, presented by legislator Gabriel Silva, seeks to create a regulatory framework that promotes “banking interoperability”, to make traditional systems compatible with new technologies and thus ensure greater inclusion.

The bill, called “Crypto Law: Making Panama compatible with the digital economy, blockchain, crypto assets and the Internet”, is seen as a step in the right direction as Panama lags behind other countries in terms of the implementation of cryptocurrencies, in both their use and as part of currency circulation, according to José Abbo, director of savings fund Fondo Ahorro de Panamá and an independent financial advisor.

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Although he acknowledged that the project was inspired by the experience of El Salvador, which in 2021 made Bitcoin legal tender, Silva said that the Panamanian proposal is different, as it does not intend to establish Bitcoin as legal tender, but rather to promote the use of several crypto currencies.

Read More: Why Bitcoin Is Losing Its Shine in El Salvador

“In El Salvador, a digital wallet was created, but that is not the plan here,” Abbo said, pointing out that Panama can no longer continue to depend on the usual sectors for its development, and that the introduction of cryptocurrencies would bring a lot of investment in technology.

Cryptocurrencies have a dual use, as they can be used as a speculative asset and as an asset that would facilitate the movement of digital money in Panama’s banking environment, “and that is where the contribution of banks to adapt to this new reality comes in”, Abbo said.

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For his part, Otto O. Wolfschoon, president of the board of directors of the Panama Banking Association, believes that it is important that the country remains attentive to the development of new technologies and new financial products, including the issue of digital assets.

He points out that any innovative action in that direction must be analyzed in terms of cost/benefit and risk/return, so it is extremely important, because of the sensitivity of the issue, to analyze, weigh up and evaluate any change to the structure of the country’s monetary system, which is fully dollarized and connected to the rest of the world.

Read More: Argentina Aims for First Crypto Futures in Latin America

“This dollarization and financial integration is one of the pillars, not of our economy, but of our country”, Wolfschoon said.

“While we make this analysis we have to be very careful not to accelerate an issue that precisely at this moment that the U.S. dollar as legal tender in the country is being analyzed,” he said.

Abbo said that the Panamanian banking system’s advantage is that it has kept up to date with current technology, and which would help to propel the system by offering new products that will allow, for example, having a savings account in U.S. dollars and another in cryptocurrencies, as occurs in Europe.

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He also added that it is an opportunity to create joint ventures to offer this type of services, with an exchange rate functioning not just in U.S. dollars but in digital assets.

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The bill states in the explanatory memorandum, once approved, all persons would be able to freely trade in crypto assets, including Bitcoin and Ethereum, as a means of payment for any civil or commercial operation not prohibited by the country’s legal system.

Likewise, entities may receive payments, directly or through payment processors or agents contracted for such purpose, for taxes, fees and other tax obligations in crypto assets.

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The above would be possible thanks to a regulation on the use of crypto assets for the payment of taxes issued by the General Directorate of Taxes of the Ministry of Economy and Finance, in coordination with the Government Innovation Authority, based on the principles of protection, order and transparency of public finances; and cybersecurity best practices to avoid financial losses.

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