The State of Crypto Adoption in Panama
Source: Envato
In 2024, the crypto market in Panama is expected to be worth $6 million, though this is quite small compared to the United States, which leads globally with $9,788 million. Interestingly, Panama's market is predicted to shrink slightly, dropping to $5.8 million by 2025.
About 3.4% of the population is involved in cryptocurrencies, which means roughly 156,300 people will be using crypto by 2025.
On average, each user spends about $38.60 on cryptocurrencies in 2024. These numbers suggest that while crypto isn't mainstream in Panama yet, a steady group of people are using it.
Crypto is growing in Panama because of the country's friendly approach to cryptocurrency regulations and the interest of more local businesses in using crypto.
This supportive environment could help make cryptocurrencies more common in Panama's everyday business activities, even though the market is currently showing a slight decline in value.
Crypto Law In Panama
Source: Envato
In 2021, Bill No. 697 was introduced in the country's National Assembly. This bill aimed to create a legal framework for the use of cryptocurrencies and the issuance of digital assets in Panama.
The proposed bill would have allowed individuals and businesses in Panama to use cryptocurrencies to pay for goods and services.
It also would have provided guidelines for the issuance of digital assets, which could have turned Panama into a hub for initial coin offerings (ICOs) and other blockchain-based ventures.
Source: X
On April 28, 2022, Panama's National Assembly announced that it had passed Bill No. 697, which regulates the commercialization and use of cryptoassets.
This new bill provides that individuals and companies in Panama can freely use cryptocurrencies such as Bitcoin, Ethereum, XRP, and others as payment for commercial transactions allowed under Panamanian law.
The bill also gives the government of Panama the authority to offer digital wallets to individuals and companies for making payments and exchanging crypto assets.
Additionally, Panamanian agencies will be able to receive tax payments using cryptocurrencies, according to directives to be issued by the country's tax authority later in 2022.
Companies that want to provide services involving crypto assets will need to obtain a license from the Department of Commerce and will be subject to Panama's laws and regulations related to anti-money laundering, combating the financing of terrorism, and the financing of weapons of mass destruction.
Crypto Taxation In Panama
Panama has a zero-rated value-added tax (VAT) on all cryptocurrency-related transactions. This means that buying, selling, and using cryptocurrencies for goods and services do not incur VAT, reducing the financial burden on crypto users and potentially encouraging the adoption of blockchain technology.
I believe that Panama is a country that has always been very advanced in the financial market and perhaps it needs to give a boost to the regulations to give recognition to this technology in the financial market. I think that now is the time to do so, not recognize this technology, put it to the test, create a pilot system to test it and see the efficiencies and, if necessary, generalize its use,
For businesses operating in the cryptocurrency space, any revenues generated from crypto-related activities are included in the company's overall revenues and subject to the standard corporate tax rate of 25%.
It is crucial for these businesses to properly classify their activities as business-related to ensure accurate tax reporting.
Panama also requires businesses and individuals to maintain detailed records of all cryptocurrency transactions. This is essential for tax purposes, as the country's tax authorities may request verification of income and expenses during an audit.
How to Get a Panama Crypto License
To obtain a cryptocurrency license in Panama, there are several steps you need to follow:
Business Setup
First, you need to set up your business in Panama. This typically involves choosing the right legal structure, such as a Limited Liability Company (S.R.L.) or a Joint Stock Company (S.A.). You'll need to prepare and file the necessary documents, like the memorandum of association and company statutes.
Tax Registration
After establishing your company, you'll need to register with the Panama Tax Authority to get a unique tax identification number (RUC). This allows you to operate your business and fulfill your tax obligations.
Open a Bank Account
To conduct financial transactions, you'll need to open a corporate bank account in Panama. This process can be complex and may require extensive documentation about your company and its owners.
Comply with Regulations
As a cryptocurrency business, you'll need to comply with various regulatory requirements, such as anti-money laundering (AML) measures and customer identification procedures (KYC). Ensure that your company has the necessary controls and compliance systems in place.
Apply for the License
Finally, you'll need to apply for a cryptocurrency license with the relevant Panamanian regulatory authority. This involves submitting a complete set of documents and information about your business
Cryptocurrency Usage in Different Sector
Cryptocurrency usage in Panama is growing across various sectors. Here are some examples:
Financial Services
Panama is known for its robust financial services sector. Cryptocurrencies are being integrated into financial services, with companies offering crypto wallets, exchanges, and other related services. For instance, Panacrypto is a platform that provides various crypto services and ensures compliance with local regulations.
Real Estate
Cryptocurrencies are also being used in the real estate sector. Some real estate companies in Panama accept cryptocurrency payments for property transactions. This allows for more flexible and international transactions, attracting foreign investors who prefer using digital currencies.
Government Services
Panama has made strides in integrating cryptocurrencies into government services. The Panamanian Legislative Assembly passed a bill that allows citizens to use cryptocurrencies to pay taxes and settle civil debts. This move aims to modernize the country's financial infrastructure and promote the use of digital assets.
Challenges to Crypto Adoption in Panama
While cryptocurrency adoption in Panama is on the rise, several challenges hinder its widespread acceptance:
Regulatory Uncertainty
One of the biggest challenges is the lack of a comprehensive regulatory framework. Although there have been legislative attempts, such as Bill No. 697, to establish clear guidelines for cryptocurrency use, the bill has not yet been enacted into law. This creates a legal grey area, leaving businesses and individuals uncertain about compliance requirements.
Anti-Money Laundering (AML) and Know-Your-Customer (KYC) Compliance
Cryptocurrency businesses in Panama must navigate stringent AML and KYC regulations. While these regulations are designed to prevent illicit activities, they can be complex and burdensome for companies to implement, especially those that are new to the crypto space.
Market Instability and Fraud
The absence of specific crypto regulations can make the market vulnerable to fraudulent schemes and market instability. This can deter potential investors and users who are concerned about the security and reliability of cryptocurrency transactions.
Potential Benefits of Crypto Adoption in Panama
The adoption of cryptocurrencies in Panama could bring several potential benefits to the country:
Attracting Foreign Investment
Panama's favorable tax laws and strategic location make it an attractive destination for international investors. By embracing cryptocurrencies, Panama can further enhance its appeal to foreign investors and tech companies looking for a crypto-friendly environment.
Promoting Innovation
Cryptocurrencies and blockchain technology can drive innovation in various sectors, including finance, healthcare, and supply chain management. This can lead to the development of new business models and solutions.
Strengthening International Trade
Cryptocurrencies can facilitate cross-border transactions, reducing the need for intermediaries and lowering transaction fees. This can enhance international trade and economic cooperation.
Conclusion
Panama is looking to be a leader in using cryptocurrencies in Central America. The government is making it legal to use crypto and is writing clear rules to keep things safe.
This could make Panama a center for crypto businesses, bringing in more money from other countries and helping the economy.
There are still some challenges, but Panama is ready to embrace new technology and become a leader in crypto.
