Today, the National Assembly of the Republic of Panama has approved what is now being colloquially called Panama’s Crypto Law. In essence, Law 697 was passed today by an overwhelming majority of the Assemblymen and now it has to be passed to the President of Panama for signing.
Below we outline some of the main features of this new Law, which will require that several key entities of the Government come up with Regulatory requirements for some of the entities that will be regulated in a term of no more than 3 months after the Law is signed by the President and published in the Official Gazette of the Republic of Panama.
This is a big step for Panama given the current economic climate and the more than the possible entrance of Panama into the FATF Black List. But if implemented quickly and efficiently, this new Law has the possibility to attract significant foreign direct investment into the country, and job creation, and Panama may be able to positively navigate the possible negative effects of the aforementioned black list.
Of course, as a country we have to aim to be deemed in compliance with international standards, and as such Panama still has to keep working on finalizing the implementation of other important regulations such as the Private Register of Beneficial Owners in order to start showing tangible results that may lead to taking us out of the black list in less than a year and then Panama will be unstoppable!
Please find below the more salient features of the Law:
- Any person (entities and individuals, nationals or foreigners), the government, and even branches of foreign corporations properly registered in Panama can transact with all cryptocurrencies as means of payment, including BTC, ETH, XRP, LTC, XDC, XLM, IOTA, ALGO, and ELROND.
- Taxes will be able to be paid with cryptocurrency.
- Issuers of securities can now use blockchain, distributed ledger technology, or crypto assets as a form to represent the securities and any other assets, including precious metals and real estate.
- Allows the tokenization of gold and silver stored in Panama or abroad (in compliance with other requirements).
- The law also approves the issuance of Security Tokens (STOs), including tokens that represent capital, and debt, and are backed by financial assets.
- Allows issuance of tokens with physical asset backing (real estate, precious metals, carbon bonds.
- Issuers of redeemable digital securities are regulated
- The National Bank of Panama will be in charge of issuing internal regulations that will allow them to open bank accounts for issuers of redeemable digital securities, effectively assisting with fiat transactions.
- Payment Processors or Payments Systems using crypto are allowed and regulated.
- It introduces the concept of crypto assets with an underlying value in Panama (invested in Panama) for the purpose of determining if such crypto asset triggers taxation in the Republic of Panama. In the case of the sale of a crypto asset with underlying value, there will be a capital gain tax of 4%.
- The transfer of crypto assets will not trigger the tax on the transfer of Movable Assets and Services of 7%.
We will gladly keep you informed as this Law and its regulations progress.
For any questions or doubts, please do not hesitate to contact us.