Panama Introduces Legislation to Legalize Voluntary Crypto Payments, Regulate Industry

Panama has unveiled a sweeping draft bill aimed at regulating cryptocurrencies and fostering the development of blockchain-based services, signaling a renewed effort to position the country as a fintech leader in Latin America. The proposed law establishes a legal framework for using digital assets in financial transactions, establishes licensing requirements for service providers, and includes strict compliance measures in line with international financial standards. Under the bill, digital assets are recognized as a legal means of payment, allowing individuals and businesses to freely agree on their use in both commercial and civil contracts.

The legislation explicitly authorizes the use of cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and stablecoins to purchase goods, pay for services, and settle debts, provided that both parties consent. The draft also creates a regulatory framework for Virtual Asset Service Providers (VASPs), including wallets, exchanges, and custody platforms. Each would be required to register in a national database managed by the Financial Analysis Unit (UAF) and obtain proper authorization before offering services in Panama.

The bill stipulates mandatory compliance with Know-Your-Customer (KYC) and anti-money laundering (AML) guidelines in accordance with the recommendations of the Financial Action Task Force (FATF). Additionally, the bill stipulates that any unregistered or non-compliant entities could face administrative sanctions or criminal penalties. Beyond financial regulation, the bill encourages the use of blockchain in public administration. It outlines provisions for digital identity systems and the issuance of tokenized securities, aiming to reduce bureaucratic inefficiencies and promote transparency in both the public and private sectors.

The legislation also authorizes smart contracts, recognizing their legal enforceability under Panamanian law. Lawmakers see this as an opportunity to enable innovative financial products and automate business processes through programmable agreements. If passed, the bill would mark a significant policy shift after a previous crypto law — passed by the legislature in 2022 — was partially vetoed by then-President Laurentino Cortizo, who raised concerns about regulatory gaps and constitutional inconsistencies.

The new draft addresses these concerns by clearly defining the roles of regulatory authorities, including the UAF and the Superintendency of Banks of Panama. The draft bill is expected to proceed to committee discussions in the National Assembly in the coming weeks, where it may undergo amendments before being brought to a vote.