The bill, presented by Congressman Gabriel Silva on Tuesday night, seeks to make Panama a “country compatible with the digital economy, blockchain, crypto assets and the internet.”
The text proposes that individuals in Panama or legal entities established in the country may freely agree to use cryptocurrency as a means of payment for any civil or commercial operation not prohibited by the legal system.
The project also proposes that taxes, fees and other tax obligations may be paid using cryptocurrency.
As Silva confirmed to CoinDesk, the use of cryptocurrencies is not illegal in Panama. There is no enforced currency in the Panamanian constitution, although the U.S. dollar has been used officially since 1904, when a monetary agreement between the countries known as Taft-Arias took effect.
“There are no certainties in the fiscal rules, and with this project we seek to bring them”, said Felipe Echandi, a local crypto entrepreneur who worked with Silva in the drafting of the bill.
According to Echandi, the bill subjects cryptocurrencies to the capital gains regime, as in the United States, and excludes them from value added tax (VAT). “We believe this is a worldwide trend,” he said.
The proposed legislation also seeks to establish principles of banking interoperability so that traditional financial systems are compatible with new ones. In Silva’s words, that would mean the possibility of connecting a bank account with an exchange.
“Today you can’t even connect a bank account with PayPal,” Silva said.
According to Echandi, the objective of the bill is for crypto to be used by two parties that have a contract as well as create conditions to broaden crypto use, such as in a local store.
In addition to the regulation of cryptocurrencies, the project also seeks to “expand the digitalization of the state” through the use of distributed ledger technology by digitizing the identity of individuals and legal entities, according to a draft of the bill.
The digitization process will allow Panama to be compatible with smart contracts and DAOs (decentralized autonomous organizations), the bill reads. “The country has all the potential to be a digital identity provider for the rest of the world as Estonia has done with its digital residency program,” it adds.
“The most futuristic vision is that Panama has to become a DAO,” said Echandi, who added that the bill is an intermediate step toward that vision.
According to Echandi, the bill seeks to strengthen the crypto ecosystem in the country and promote the arrival of crypto companies to the country.
“While it is not currently illegal to acquire or buy cryptocurrencies, there are not numerous exchanges or platforms to convert from fiat to crypto or vice versa,” he added.
In addition, the proposed legislation allows issuers of securities to use distributed ledger technology, blockchain, or cryptocurrencies to represent those releases.
Just as Panama has become a financial hub in recent years, with this bill the country could become a desirable jurisdiction for companies seeking to issue any type of asset, Echandi said.
Silva – a member of Bancada Independiente, an independent and opposition party – said that both the ruling and opposition benches are willing to deal with the bill. In the last two months, he met with different public institutions that would be involved in the operation of crypto, such as the Ministry of Finance, the National Bank and the Superintendency of Banks, he added.
The project gathered comments from different parties, including lawyers, bitcoin users, crypto-related companies and government officials, Silva said.
Silva confirmed to CoinDesk in June that he was going to introduce the bill in July, although it was delayed by the collection of comments from different parties, he added.
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