Panama unveils virtual asset regulation proposal... Recognizes Bitcoin as 'legal tender'

Panama has unveiled a draft of a bill encompassing virtual assets (cryptocurrencies) in general. The plan is to legally recognize virtual assets and clarify licensing standards for related service providers, with the intention of introducing blockchain technology across public administration.

The bill specifies virtual assets such as Bitcoin (BTC), Ethereum (ETH), and stablecoins as legal tender. It allows individuals and companies to freely use them for commercial and civil transactions, such as payment for goods and services and debt settlement, upon mutual agreement.

A registration and licensing system will also be introduced for service providers (VASPs) such as virtual asset wallets, exchanges, and custody platforms. These businesses must register with the Panama Financial Analysis Unit (UAF) and obtain a business license. They must also comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations according to the Financial Action Task Force (FATF) standards. Non-registration and non-compliance may result in administrative penalties or criminal sanctions.

The plan also includes actively introducing blockchain into the public sector. By building a digital identity system and issuing tokenized securities, the aim is to enhance administrative efficiency and transparency. Smart contracts will be recognized as a legally effective contract method, which is expected to lead to the full-scale development of automated financial products and digital services. The bill is expected to go through parliamentary committee discussions and proceed to a plenary vote.