Panama has introduced a comprehensive draft legislation designed to regulate cryptocurrencies while encouraging the growth of blockchain services, marking a renewed ambition to establish the nation as a leader in fintech within Latin America.
This proposed law aims to create a regulatory framework for the use of digital assets in financial transactions, set licensing requirements for service providers, and implement stringent compliance measures that align with international financial norms.
Legal acknowledgment of digital assets
Specifically, the legislation permits the use of cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and stablecoins for purchasing goods, availing services, and settling debts, contingent on the consent of both parties.
The draft also establishes a regulatory framework for Virtual Asset Service Providers (VASPs), which includes wallets, exchanges, and custody platforms. These entities will need to register in a national database overseen by the Financial Analysis Unit (UAF) and secure necessary authorization prior to providing services in Panama.
Furthermore, the bill mandates adherence to Know-Your-Customer (KYC) and anti-money laundering (AML) protocols in accordance with the guidelines set forth by the Financial Action Task Force (FATF).
It also specifies that any unregistered or non-compliant entities may face administrative penalties or criminal charges.
Utilizing blockchain for governance and digital identity
In addition to financial regulations, the bill promotes the adoption of blockchain technology in governmental operations. It lays out provisions for digital identity systems and tokenized securities, with the aim of streamlining bureaucratic processes and enhancing transparency within both public and private sectors.
The legislation further legitimizes smart contracts, acknowledging their enforceability under Panamanian law. Lawmakers view this as a pathway to foster innovative financial solutions and automate business operations through programmable agreements.
If enacted, this bill would represent a notable policy shift following a previous cryptocurrency law passed by the legislature in 2022, which was partially vetoed by former President Laurentino Cortizo due to concerns over regulatory gaps and constitutional inconsistencies.
The new draft addresses these issues by clearly delineating the responsibilities of regulatory bodies, including the UAF and the Superintendency of Banks in Panama.
The draft legislation is anticipated to move into committee discussions within the National Assembly in the upcoming weeks, where it may be subject to revisions before a vote occurs.
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