The Panamanian Legislative Assembly has unanimously passed a bill recognizing digital assets as foreign-source income in a 40-0 vote. Once Panama’s president Laurentino Cortizo signs this bill into law, residents will no longer have to pay capital gains taxes on crypto profits.
The Panamanian Legislative Assembly’s announcement expresses an interest in nine digital assets, specifically approving Bitcoin (BTC), Ether (ETH), Litecoin (LTC), Ripple (XRP), Stellar (XLM), Elrond (EGLD), Algorand (ALGO), IOTA (MIOTA), and XDC Network (XDC).
Upon presidential signature, these crypto assets may be used as a means of commercial payment “without limitation.” Panamanians may also use these digital assets to satisfy normal taxes like income or property taxes.
However, Panama’s new crypto law does not establish any digital currency as legal tender. The Central American country’s constitution forbids the establishment of a second official currency — the first being the US dollar.
Panama previously forbade crypto companies to establish a presence in the country, a decision that will also expire if President Cortizo signs.
Independent politician Gabriel Silva, a congressman in the National Assembly of Panama, sponsored the bill — which merged rulemaking efforts between Silva and fellow legislator Cenobia Vargas. Crypto entrepreneur Felipe Enchandi assisted in drafting the bill’s text.
Silva expressed interest in having Panama promote crypto adoption without making Bitcoin legal tender. He reminded media outlets that Panama cannot establish any crypto assets as legal tender without amending its constitution.
Unlike El Salvador, Panama has no plans to issue a state-backed crypto wallet. Any local who uses crypto will have to download a wallet of choice on their own devices.
Panama’s crypto law could boost GDP
Removing obstacles to the private use of crypto assets could create jobs and improve financial inclusion in Panama, supporters of the bill claim. In an interview, Silva cited more than 50% of Panamanians lack access to financial services.
Most crypto exchanges have to implement know-your-customer (KYC) and anti-money laundering (AML) procedures. Yet, many unbanked people cannot pass these checks to access financial services, nor do they frequently live nearby.
Supporters of crypto have often cited its “banking the unbanked” potential as a reason to mass adopt digital currencies. Including this group of citizens can become as simple as helping them download a wallet on an inexpensive mobile device, where they can use ATMs to exchange with US dollars — without requiring a bank account or identification.
Panama’s Legislative Assembly reiterated this feature in its announcement of the bill’s passage. However, citizen access to ATMs are currently limited — according to Coin ATM Radar, 26 of the 28 ATMs in the country are located in its capital, Panama City.
Silva also expressed an interest in using blockchain technology to increase transparency and efficiency in government operations. Silva said blockchains could track chains of ownership for digital assets and be used by governments to track digitalized documents, emails, or regulatory filings.
The Legislative Assembly’s announcement briefly clarified that using digital currencies is optional. It establishes no legal requirement for private businesses to accept crypto payments. The bill gives Panama’s National Bank the authority to oversee crypto-related activities.
Panamanian residents will still have to pay taxes on Panama-derived income, rental income, property sales, import/export duties, and asset transfer taxes.