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As Panama weighs the option of passing a sweeping new bill on cryptocurrencies, President Laurentino Cortizo recently told audiences in Panama City that stronger anti-money laundering protocols would need to be in place before the bill could be signed.

Panama currently ranks among the top countries for money laundering and terrorism financing in Latin America, causing it to be placed on the Financial Action Task Force's (FATF) "grey list."

Cortizo said the bill was a “good law,” but expressed ambivalence about signing it into law if it imperiled the country's ability to get off the grey list.

Panama has a close geographic proximity to Colombia and Mexico, making the country a destination country for drug trafficking and money laundering from the trade.

Earlier this year, Panama was asked by the FATF to have an action plan in June for how it plans to combat money laundering and terror financing.

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“If I’m going to answer you right now with the information that I have, which is not enough, I will not sign that law,” he said. “I have to be very careful if the law has clauses related to money laundering activities or anti-money laundering activities. That is very important for us.”

To that end, Cortizo said his lawyers would closely evaluate the bill and veto specific sections that could jeopardize Panama's status with the FATF.

“It is an innovative law from what I have heard, it’s a good law,” Cortizo said. “However, we do have a solid financial system here in Panama and one of the things I’m waiting on is when you have a global regulation of crypto-assets.”

Unlike El Salvador's law, which made Bitcoin legal tender, Panama's bill is not looking to provide legal tender status to cryptocurrencies, but will effectively allow the country to have a regulatory environment around the digital currency. Proponents of the bill say it could promote government transparency and allow Panamanians to pay taxes in cryptocurrencies.

The bill also effectively ensures there would be no taxes on capital gains from crypto profits by declaring virtual assets as "foreign-source income" and would also enable crypto firms to operate in Panama.