Panama opens the door to cryptocurrencies and tokens
In Panama, Parliament on Thursday approved legislation that would restrict the use and commercialization of assets in cryptocurrencies regulated. In the Central American country, which is known as a hub for offshore financial services, this enables the private and public use of cryptocurrencies such as Bitcoin, for example to pay taxes.
The law is broader than that of El Salvador, which introduced cryptocurrency last year Bitcoin made legal tender. Not only cryptocurrencies themselves should fall under the law, but also other digital assets such as the so-called tokens. This is a digitized form of an asset, such as real estate, precious metals or works of art. Ownership is digitally mapped and can therefore be traded. Under the new legislation, Panamanians can also use crypto assets as a means of payment.
Financial experts warned that a law introducing cryptocurrencies could further bolster Panama’s reputation as a financial center with poor transparency, as cryptocurrency trades are difficult to trace and bypass processes required by international organizations. Panama is already on the European Union’s list of tax havens and has a dubious reputation. Despite the concerns, President Laurentino Cortizo is expected to sign the law, which was approved unanimously by Parliament.
Latin America is leading the way
After El Salvador and now Panama, other countries in Latin America are likely to regulate the use of cryptocurrencies soon. Corresponding discussions are being held in various countries, including Brazil and Mexico. The aim is also to prevent the criminal use of cryptocurrencies for money laundering or evasion or to finance organized crime. Even without legal regulation, the use of cryptocurrencies in Latin America has increased massively in recent years. Between 2019 and 2021, usage in Latin America increased by almost 1400 percent, according to Chainanalysis. In 2021, over $500 billion worth of cryptocurrencies were traded in countries in the region.
For many Latin Americans, cryptocurrencies have a very practical use. Half of Latin Americans are unbanked, but virtually everyone has a cell phone and access to the internet. However, in El Salvador, where Bitcoin can be used as a means of payment, everyday use is limited. This changes in the case of families who have relatives abroad. Remittances are an important source of income for many families and economies in the region. In El Salvador, for example, they contribute around 24 percent to the gross domestic product. Transfers using bitcoin or other cryptocurrencies are much cheaper than traditional services. According to service provider Coinpay, transfers using cryptocurrencies in Latin America increased by 900 percent in 2021.
Venezuela has also contributed to this, where five million people have left the country in recent years. Many are turning to cryptocurrencies to send money to their families who remain in Venezuela. Last year, the country was one of the countries with one of the highest adoption and usage rates. Likewise Argentina, where the reason is seen more in the currency devaluation. Argentinians are less and less storing their savings in dollar bills under their mattresses, instead resorting to crypto wallets.