Panama Passes Landmark Crypto Law: National Assembly Approves Bill 697 Regulating Digital Assets

Panama took a decisive step toward embracing the digital economy on April 28, 2022, as the National Assembly voted to approve Bill No. 697, widely known as the “Crypto Law.” The legislation, which passed with 38 votes in favor and zero against, establishes a comprehensive regulatory framework for the use, issuance, and commercialization of cryptocurrencies and other digital assets within the Central American nation.

TL;DR

• Panama’s National Assembly passed Bill No. 697 (“Crypto Law”) with 38-0 vote on April 28, 2022
• The law regulates crypto use, digital asset issuance, tokenization of precious metals, and payment systems
• Bitcoin, Ethereum, XRP, Litecoin, Stellar, Elrond, Algorand, and IOTA are explicitly included
• Unlike El Salvador, the bill does NOT make cryptocurrency legal tender — businesses are not obligated to accept it
• Congressman Gabriel Silva championed the bill as a path to making Panama a Latin American tech and innovation hub

A New Chapter for Latin American Crypto Adoption

The passage of Bill No. 697 positions Panama as one of the most forward-thinking nations in Latin America when it comes to cryptocurrency regulation. While neighboring El Salvador made headlines in September 2021 by adopting Bitcoin as legal tender, Panama chose a different approach — one focused on creating regulatory clarity and fostering innovation without imposing mandates on businesses or citizens.

Congressman Gabriel Silva, the bill’s primary sponsor, celebrated the vote on social media, declaring that the Crypto Law would “help Panama become a hub of innovation and technology in Latin America.” His vision aligns with the country’s broader Digital Agenda, which seeks to integrate blockchain technology and distributed ledger systems into the fabric of Panama’s economy.

What the Crypto Law Actually Covers

The scope of Bill No. 697 is remarkably broad. It addresses the commercialization and use of what Panamanian legislators termed “cryptoactives,” the issuance of digital value, the tokenization of precious metals and other goods, and payment systems built on blockchain infrastructure. The law specifically names Bitcoin, Ethereum, XRP, Litecoin, Stellar, Elrond, Algorand, and IOTA as recognized digital assets, though it is not limited to these alone.

Notably, the legislation also enables the tokenization of rights to precious metals and other physical assets, effectively creating a legal pathway for real-world asset (RWA) representation on the blockchain — a concept that was still in its early stages globally at the time.

A Deliberate Departure from El Salvador’s Model

One of the most significant aspects of Panama’s approach is what the Crypto Law does not do. Unlike El Salvador’s Bitcoin Law, which made BTC legal tender and required businesses to accept it, Panama’s legislation explicitly states that commercial entities are under no obligation to accept cryptocurrency as payment. This opt-in design was intended to avoid the controversies that plagued El Salvador’s rollout, where reports emerged of employees being paid in cryptocurrency without their consent.

The law also classified cryptocurrency transactions as foreign-source income, since they take place online. According to Congressman Silva’s interpretation, this meant such transactions would not be subject to capital gains taxation — a potentially attractive feature for international investors and digital nomads considering Panama as a base of operations.

Financial Inclusion for the Unbanked

A key motivation behind the legislation was Panama’s large unbanked population. Approximately half of Panamanian citizens lack access to traditional banking services. By providing a legal framework for digital wallets and cryptocurrency transactions, the Crypto Law aimed to give millions of people access to financial tools they had previously been excluded from.

The bill envisioned the creation of a government-backed digital wallet that would allow citizens to use crypto assets to pay taxes, fees, and other financial obligations, streamlining government processes and promoting transparency.

Regulatory Hurdles Remain

Despite the overwhelming legislative support, the bill still needed to be signed by President Laurentino Cortizo to become law. While the President was broadly supportive of the initiative, he declined to sign the bill in its original form, citing the need for stronger Anti-Money Laundering (AML) provisions aligned with Financial Action Task Force (FATF) recommendations. Concerns about FATF penalties — particularly sensitive given Panama’s history with the Panama Papers scandal — were a significant factor in the President’s cautious approach.

This meant the National Assembly would need to amend the bill with tougher AML measures before it could receive executive approval and become enforceable law.

Market Context: Bitcoin Holds Near $40,000

The legislative development came against a backdrop of relative stability in cryptocurrency markets. Bitcoin was trading near $39,773 on April 28, according to CoinMarketCap data, with the total crypto market capitalization standing at approximately $2.64 trillion. The Crypto Fear & Greed Index registered at 47 — firmly in neutral territory — suggesting that investors were neither overly euphoric nor excessively fearful.

The broader market context was one of cautious optimism. Bitcoin had recovered from its January lows near $33,000 and was holding in the upper $30,000 to low $40,000 range. The catastrophic Terra/LUNA collapse that would roil markets in May was still days away, and the crypto industry was in a period of relative calm before the storm.

Why This Matters

Panama’s Crypto Law represented an important middle ground in the global debate over cryptocurrency regulation. Rather than going all-in like El Salvador or maintaining a hostile posture like some jurisdictions, Panama crafted legislation that provided legal clarity and consumer protection while leaving room for organic adoption. For a country where half the population lacks bank accounts, the potential for cryptocurrency to drive financial inclusion was — and remains — enormous. The bill’s eventual fate after President Cortizo’s partial veto would shape Panama’s role in the global digital economy for years to come.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency investments carry risk, and readers should conduct their own research before making investment decisions.