On-shore VASP in Panama

No Crypto-Specific Licensing Regime: As of late 2023 / early 2024, there is no specific "virtual asset license" in Panama issued by a dedicated crypto regulator.

Be incorporated under Panamanian law (Public Registry).

Obtain a business license ("Aviso de Operación") from the Ministry of Commerce and Industries.

Requirement: While not a "license," these entities would need to register with the SSNF for AML/CFT oversight and comply with all associated requirements.

Relevance: If the virtual asset is deemed a "security" under Panamanian law, then the SMV would have jurisdiction. This is a crucial distinction.

Requirement: A license as a broker-dealer, investment adviser, or other regulated entity under securities law might be required, depending on the specific service.

Applicability: If an exchange, custody provider, or payment processor holds significant fiat balances for clients, offers fiat-to-crypto conversion with a "trust" element, or provides services that closely mimic those of licensed financial institutions (e.g., issuing payment instruments that are essentially fiat-backed digital money), the SBP might assert jurisdiction. This is a high bar, as the SBP primarily regulates licensed banks and financial groups.

Requirement: A banking license or a license as a specific type of financial institution would be required, which is highly stringent.

No specific crypto VASP capital requirements.

General corporate capitalization requirements apply for company formation.

Law 23 of April 27, 2015 (Ley 23 de 27 de abril de 2015): This is the foundational AML/CFT law in Panama. It adopted measures to prevent money laundering, financing of terrorism, and financing of the proliferation of weapons of mass destruction. It established the Financial Analysis Unit (UAF) and defined "obligated subjects" (sujetos obligados), which, through subsequent interpretations and amendments, have come to include VASPs. This law sets general obligations for customer due diligence, suspicious transaction reporting, and record-keeping.

Executive Decree 44 of April 15, 2016 (Decreto Ejecutivo N° 44 de 15 de abril de 2016): This decree complements Law 23, providing detailed regulations for its application, including specific procedures for due diligence, risk assessment, and internal controls for obligated subjects.

Law 1 of January 5, 2024 (Ley No. 1 de 5 de enero de 2024): This is the most crucial and recent piece of legislation specifically for virtual assets. It amends Law 23 of 2015 and other related laws to define virtual assets and virtual asset service providers (VASPs), establish a licensing and supervision regime, and explicitly subject VASPs to AML/CFT obligations under the supervision of the Superintendency of Banks of Panama (SBP). This law ensures Panama's compliance with FATF Recommendation 15 on new technologies and VASPs.

Superintendencia de Bancos de Panamá (SBP) - Superintendency of Banks of Panama:

Role: With the enactment of Law 1 of 2024, the SBP is now the primary regulatory and supervisory authority responsible for the licensing, authorization, and oversight of VASPs in Panama. This includes ensuring their compliance with AML/CFT requirements, operational standards, and consumer protection.

Unidad de Análisis Financiero (UAF) - Financial Analysis Unit of Panama:

Obligation to Report: VASPs are legally obligated to report any suspicious transaction or activity to the UAF, regardless of the amount. A transaction is suspicious if the VASP has reasonable grounds to suspect that it may be related to money laundering, terrorism financing, or other illicit activities.

No Tipping-Off: VASPs, their employees, and officers are prohibited from disclosing to the customer or any third party that an STR has been or will be submitted.

Duration: Records must typically be kept for at least five (5) years after the business relationship has ended or after the date of the transaction.

Identification and Verification:

For Individuals: Obtaining and verifying the identity of the customer and beneficial owner (if different from the customer) using reliable, independent source documents, data, or information (e.g., government-issued ID, passport, proof of address).

For Legal Entities/Arrangements: Obtaining and verifying the legal name, legal form, proof of existence, powers that regulate and bind the entity, names of relevant persons (directors, partners), and the identity of beneficial owners (those ultimately owning or controlling more than a specified percentage, typically 10% or 25%).

Understanding the Purpose and Nature of the Business Relationship: Gathering information on the customer's financial activities, expected transaction types, and the source of funds/wealth.

Evidence fact pa.aml.ongoing-monitoring not found (may have been renamed).

Enhanced Due Diligence (EDD): Applying EDD measures for high-risk customers, business relationships, or transactions, which include:

Politically Exposed Persons (PEPs) and their family members and close associates.

Customers from high-risk jurisdictions identified by FATF or local authorities.

Transactions involving new or developing technologies that might favor anonymity.

High-value or complex transactions.

Obtaining senior management approval for establishing or continuing high-risk relationships.

Simplified Due Diligence (SDD): Permitted in clearly defined low-risk scenarios, provided there is sufficient information to justify such an approach.

Current Status: The bill was returned to the National Assembly for reconsideration of the vetoed articles. As of now, it remains in legislative limbo, meaning the comprehensive framework it proposed, including specific custody regulations, is not currently in force.

Bill 697 / Law 173 (Proyecto de Ley No. 697 / Ley 173): This bill aimed to regulate the commercialization, use, and issuance of digital assets and create a framework for their recognition, custody, and tokenization. It specifically included provisions for:

No specific, comprehensive law for virtual assets and VASPs fully implementing the Travel Rule has been adopted and made effective.

Current Situation: In the absence of specific crypto legislation, existing general AML/CFT laws (like Law 23 of 2015) and regulations may apply to activities involving virtual assets if they fall under the definition of financial services or other regulated activities, but this application is often indirect and does not fully address the Travel Rule's specific requirements for VAs.

Without specific VASP legislation, there are no specific threshold amounts established for the Travel Rule in Panama.

Conclusion: In practice, most crypto capital gains for Panamanian residents are tax-exempt due to the territorial principle.

Conclusion: The key determinant is the source of the income. Most crypto-related income for Panamanian residents/businesses will likely fall under the foreign-sourced exemption.

Failed Cryptocurrency Law (Bill 697):

Focus on AML/CFT: Panama was on the FATF grey list until October 2023, which heavily emphasized improving its Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) regime. While this pressure indirectly affects crypto (as it's a known vector for financial crime), direct, high-profile enforcement actions against crypto entities with specific fines haven't been widely publicized as a result.