Panama’s Digital Currency Conundrum: Lack of Legislation Leaves Door Open for Financial Crime
As Panama’s financial sector continues to grapple with the rise of digital currencies, experts warn that the lack of legislation on the matter could leave the country vulnerable to financial crime.
The Growing Concern
The use of digital currencies such as cryptocurrencies, NFTs, and tokens has increased globally, with many individuals and companies turning to them as a means of payment, savings, or investment. However, Panama’s lack of legislation on the matter has created a legal vacuum that is being exploited by unscrupulous individuals and companies.
The Current Situation
The Superintendency of Banks and the Superintendency of the Securities Market in Panama have sounded the alarm, warning users that crypto assets are not regulated by financial institutions and do not require licenses or notifications. This lack of regulation has created a number of problems, including:
- A lack of jurisdiction for resolving disputes
- Uncertainty over whether crypto assets are being used in a lawful manner
- No mechanism to prevent and control the risks of money laundering, terrorist financing, and financing the proliferation of mass destruction weapons
The Declared Unconstitutionality of Bill 697
Last week, Bill 697, which aimed to regulate the use of digital currencies in Panama, was declared unconstitutional by the Supreme Court of Justice. The bill had been approved by the National Assembly but was objected to by the Executive Branch on the grounds that it did not comply with the parameters needed for the creation of laws.
The Concerns
The lack of legislation has created a situation where many cryptocurrency service providers are operating in Panama without any form of licensing or supervision. This includes the country’s banking entity, which has launched a “crypto-friendly” account, which could potentially be used for illicit activities.
The Consequences
Experts warn that if left unchecked, the lack of legislation on digital currencies could have serious consequences for Panama’s financial stability and reputation. It is essential that the government takes immediate action to address this issue and establish a regulatory framework that meets international standards.
Recommendations
To mitigate these risks, the government should:
- Establish a clear regulatory framework for digital currencies
- Provide licensing and supervision for cryptocurrency service providers
- Implement mechanisms to prevent and control money laundering, terrorist financing, and financing the proliferation of mass destruction weapons
- Ensure transparency and accountability in the use of digital currencies