Panama -- Stablecoin Regulations Regulatory Overview

Panama's regulatory framework for stablecoins is currently in a state of flux and is largely undeveloped and not specifically codified for stablecoins. The most significant attempt to create a comprehensive framework, Law 697 of 2022, which aimed to regulate the commercialization and use of crypto assets, was partially vetoed by the President due to concerns regarding a lack of robust anti-money laundering (AML) and counter-terrorist financing (CFT) measures, and insufficient financial supervision.

This means that as of late 2023/early 2024, there is no specific, dedicated legislation in Panama that exclusively governs stablecoins. Regulation would likely fall under existing general financial laws, depending on how a stablecoin's characteristics are interpreted by existing regulatory bodies.

Here's a breakdown based on the current situation:

Overall Context and Current Status

Panama's National Assembly passed Law 697 (sometimes referred to as Law 457 on its way through the assembly) in May 2022, which sought to establish a broad regulatory framework for crypto assets, allowing their use as a means of payment for goods and services, and enabling the tokenization of assets. However, President Laurentino Cortizo vetoed certain articles, specifically citing the absence of robust AML/CFT controls as required by international standards (e.g., FATF recommendations) and a lack of clear supervision by established financial regulators. The veto effectively halted the comprehensive implementation of the law's crypto asset framework.

Key takeaway: Without a specific law for stablecoins, the regulatory approach would be determined by the nature of the stablecoin and the existing mandates of financial regulators like the Superintendencia de Bancos de Panamá (SBP) for banking/e-money activities, or the Superintendencia del Mercado de Valores (SMV) for securities.

Specific Aspects:

1. Classification of Stablecoins (E-money/Payment Tokens/Securities):

   • No explicit classification: Due to the lack of specific stablecoin legislation, Panama has not explicitly classified stablecoins as e-money, payment tokens, or securities under a dedicated framework.
   • Potential interpretation under existing laws:
     • E-money/Payment Tokens: If a stablecoin is pegged to a fiat currency (e.g., USD) and primarily functions as a means of payment or value transfer, it could potentially be interpreted as an electronic payment instrument or a form of e-money, bringing it under the purview of the Superintendencia de Bancos de Panamá (SBP), which regulates banks and financial institutions. This would necessitate compliance with existing banking and payment services regulations.
     • Securities: If a stablecoin's structure involves an expectation of profit from the efforts of others (e.g., through staking rewards, a share in the issuer's profits, or specific investment features), or if it represents an ownership interest in a pool of assets, it could be classified as a security. In such cases, the Superintendencia del Mercado de Valores (SMV) would likely assert jurisdiction, requiring compliance with securities laws.
     • Commodity/Other: If a stablecoin is backed by a commodity or has other unique characteristics, its classification would be assessed on a case-by-case basis.

2. Reserve Requirements:

   • No specific stablecoin reserve requirements: As there is no dedicated stablecoin regulation, there are no specific reserve requirements for stablecoin issuers.
   • Potential requirements if classified otherwise: If a stablecoin issuer were to be classified as a bank, e-money issuer, or financial entity under the SBP's jurisdiction, then the existing capital, liquidity, and reserve requirements for those regulated entities would apply. This would typically involve holding sufficient liquid assets (fiat currency, government bonds) to cover liabilities.

3. Issuer Licensing:

   • No specific stablecoin issuer license: Panama does not have a specific license for stablecoin issuers.
   • Potential licensing if classified otherwise:
     • If the stablecoin activity is deemed banking or e-money issuance, the entity would likely need a banking or financial services license from the Superintendencia de Bancos de Panamá (SBP). Obtaining such a license is a rigorous and lengthy process.
     • If the stablecoin is deemed a security, the issuer and any platforms facilitating its trading would need to comply with the licensing requirements of the Superintendencia del Mercado de Valores (SMV) for securities issuers, brokers, or exchanges.
   • AML/CFT Registration: All entities dealing with financial transactions, including those potentially involving crypto assets, are subject to the Financial Analysis Unit (UAF - Unidad de Análisis Financiero) regulations regarding AML/CFT. Even in the absence of a specific crypto license, entities involved in facilitating crypto transactions would need to comply with reporting obligations.

4. Redemption Rights:

   • No explicit stablecoin redemption rights legislation: There are no specific laws in Panama mandating redemption rights for stablecoin holders.
   • Reliance on general contract law/terms of service: Redemption rights would primarily be governed by the terms and conditions set forth by the stablecoin issuer and the smart contract (if applicable). General consumer protection laws or contract law could provide a basis for disputes, but a specific framework for stablecoins is absent.

5. Algorithmic Stablecoin Rules:

   • None: Given the lack of a basic regulatory framework for even fiat-backed stablecoins, there are no specific rules or prohibitions regarding algorithmic stablecoins in Panama. Such assets would likely face even greater scrutiny if they were to achieve significant traction, given their inherent volatility risks.

6. CBDC Interaction:

   • Exploration Phase: Panama's central bank (National Bank of Panama - BNP) has publicly indicated an interest in exploring Central Bank Digital Currencies (CBDCs), but it is primarily in the research and study phase. There are no concrete plans for issuance or specific policies on how a Panamanian CBDC would interact with private stablecoins.
   • Currently, there is no direct regulatory interaction or framework defined for private stablecoins in relation to a potential Panamanian CBDC, as the latter is still conceptual.

Regulatory and Legislative References:

• Ley No. 697 de 2022 (Vetoed in part): This law attempted to establish a comprehensive framework for crypto assets. While ultimately vetoed in significant parts, it represents the most direct legislative effort concerning cryptocurrencies.
  • Reference: Gaceta Oficial Digital, No. 29541-A (May 2022). (Finding a direct official URL for the fully passed and vetoed version can be challenging due to the dynamic nature; often news sources provide summaries.)
  • Example News/Analysis of the Veto:
    • Reuters: https://www.reuters.com/markets/currencies/panama-president-partially-vetoes-crypto-law-over-money-laundering-concerns-2022-06-16/
    • Panama's Presidency Veto Statement (Spanish): Search "Comunicado de Prensa de la Presidencia de la República de Panamá Veto Ley de Criptoactivos" (Specific URL may vary).
• Superintendencia de Bancos de Panamá (SBP):
  • Official Website: https://www.superbancos.gob.pa/
  • Regulates banking and financial institutions. Relevant if stablecoins are deemed e-money or deposit-like.
• Superintendencia del Mercado de Valores (SMV):
  • Official Website: https://www.supervalores.gob.pa/
  • Regulates securities markets. Relevant if stablecoins are deemed securities.
• Unidad de Análisis Financiero (UAF):
  • Official Website: https://www.uaf.gob.pa/
  • Panama's Financial Intelligence Unit, responsible for AML/CFT regulations and reporting. All financial sector participants must comply.
• FATF (Financial Action Task Force): Panama's ongoing efforts to comply with FATF recommendations heavily influence its approach to financial regulation, particularly concerning new technologies like crypto assets.
  • FATF Website: https://www.fatf-gafi.org/

In conclusion, Panama currently operates in a regulatory vacuum specifically for stablecoins. Any entity wishing to issue or operate with stablecoins in Panama would need to carefully assess whether their activities fall under existing financial regulations and seek legal counsel to navigate the ambiguities and ensure compliance with AML/CFT requirements. The partial veto of Law 697 highlights the Panamanian government's cautious approach to crypto regulation, prioritizing financial stability and AML/CFT compliance.