Panama Unveils Draft to Regulate Crypto and Fintech
In a major development for the financial sector, Panama has approved a draft law to regulate cryptocurrencies and fintech. This move aims to provide a framework for the use and trading of cryptocurrencies, their mining, staking, and taxation treatment.
Key Provisions of the Draft Law
- Cryptocurrency Regulation: The draft law regulates Initial Coin Offerings (ICOs) for tangible and intangible tokens, as well as the licensing for Crypto Exchanges (CEX) and Payment Processors (PSP).
- Blockchain Integration: The government is set to modernize its banking system by integrating blockchain technology, smart contracts, and Decentralized Autonomous Organizations (DAOs).
Benefits of the Law Project
The draft law proposes several benefits for investors and businesses, including:
- Commercial Use of Cryptocurrencies: Allows for the commercial use of cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH)
- Secured Tokenization: Secures tokenization for real estate and carbon credits
- ICO Regulation: Regulates ICOs for Security Tokens from national and international companies
- Taxation: Taxation of crypto assets with underlying value at a rate of 4%
- Payment Processor Regulation: Regulation of Payment Processors (PSP) by the National Bank of Panama
- Anti-Money Laundering Compliance: Mandatory anti-money laundering compliance requirements for businesses
Critics of the Current Draft
While the draft law has been welcomed as a step in the right direction, some critics have raised concerns about its limitations. They argue that the law should be more inclusive and define CEX, DEX, fintech, coins, tokens, and stablecoins more clearly.
Regulation of Payment Processors
The draft law names the National Bank of Panama as the authority to issue licenses for Payment Processors (PSP). This is a significant development in the regulatory landscape, as it provides a clear framework for PSPs to operate within.
Entities of Redeemable Digital Value
The draft law establishes that businesses dealing with cryptocurrencies will be subject to compliance regulations. The Bank Superintendence will supervise the execution of Law 23 of 2015 among related parties.
Tax Focus
The draft law distinguishes between crypto assets and those with underlying value, which are taxable at a rate of 4%. Local VAT tax is not applicable for transactions involving cryptocurrencies.
While the draft law is not perfect, it marks an important step towards regulating cryptocurrencies and fintech in Panama. Its approval will provide clarity and certainty for businesses operating within this sector.