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Panama breaks into the financial system with legislative initiative of cryptocurrencies

October 31, 2020

The National Assembly of Panama reported through its official Twitter account that it had introduced its bill on the use and marketing of cryptocurrencies. The legislature is trying to regulate virtual currencies in this country.

The aim of the project is to regulate the use of cryptocurrencies or virtual currencies and the forms of transaction with them in the Republic of Panama.

The legal instrument was introduced on October 22nd by Deputy MEPs Rolando Rodríguez and MEPs Cenobia Vargas, Tito Rodríguez and Emelie García.

Panama breaks into the financial system with legislative initiative of cryptocurrencies
Panama breaks into the financial system with legislative initiative of cryptocurrencies

This draft law provides a number of definitions, including terms such as blockchain, mining, trading, tokens, cryptocurrencies or virtual wallets, which relate to the field of crypto assets and attempt to reflect a clearer and more precise overview of this regulatory aspect.

Terms such as cryptocurrencies are defined in this project as a virtual asset that can only be transferred electronically. Likewise, the social purpose of exchanges and units that work with virtual currencies is emphasized and nothing other than the management, commercialization or exchange of cryptocurrencies.

With this in mind, the project is transforming these organizations into institutions regulated by the Ministry of Industry and Trade (MICI). and Economics and Finance (MEF). The project also indicates that a lawfully incorporated trading company or branch that carries out operations with cryptocurrencies without prior authorization will face severe penalties such as cessation of business operations, the forced liquidation of the company and a fine ten times higher than that current monthly minimum wage in the region. This is highlighted by the digital newspaper Law Bitcoin.

In this sense, it also means that those who act as traders must obtain approval from the General Directorate for Electronic Commerce (DGCE). and perform operations without prior certification; As a sanction, they must pay a fine of a current monthly minimum wage.

Taxes on virtual currencies

The legal assistance document has a section called: “Taxation of operations with cryptocurrencies or virtual currencies”, Relating to taxes on operations with cryptocurrencies, It is stipulated that all cross-border transactions with virtual currencies are taxed at four percent (4%). Similarly, it is highlighted that taxpayers in the region must declare all their operations, that is, one hundred percent (100%) of them.

This legislative measure indicates this Taxes on transaction profits are paid quarterly. In the event that one of the taxpayers reports losses from the negative fluctuation in transactions, they will be exempt from paying tax. It also states that the start of paying these taxes will be January 1, 2024.

In this chapter of the bill, Article 21 mentions the creation of the Cryptocurrency Fluctuation Reserve Fund, which is responsible for managing one percent (1%) of the value paid by the tax on operations carried out by cryptocurrencies or digital currencies to subsidize those who may have cryptocurrencies and are disappearing for whatever reason.

However; In the document it is not clear and raises some doubts about what the above mentioned disappearance of the cryptocurrency market refers to (prevention of hacks, loss of private keys or other illegal acts).

In turn, the project also indicates that the Cryptocurrency Fluctuation Reserve Fund will be its own regulation and the company will set the criteria for subsidizing the acquirer. For this reason, the subsidies must take into account the status of the reserve fund and will be extended at the time the technical studies to be carried out are drawn up.

Finally, the draft law provides in its final provisions that the legal provisions can be enacted within four months of their publication. However, the project is still in the debate phase. We have to wait for this phase to complete, then the change phase, and then the approval phase.

Cryptocurrencies in Latin America

The adoption of cryptocurrencies has seen a big boost around the world, particularly in Latin America, and that’s why the governments in this region have started to work to incorporate them into their tax systems.

As we mentioned at Cointelegraph, Both in the region and around the world, regulations for digital currencies in general seek to cover a number of laws, particularly taxes, regulation of money transfer through traditional banking, consumer protection, and specific activity-related laws illegally through the use of Cryptocurrencies.

According to a global survey by the US Library of Congress, Mexico was one of the countries that have been at the forefront of regulating crypto assets. These are legal in the region, but are subject to the Fintech Act, the law regulating financial technology institutions, which was enacted in 2018.

For his part; Argentina is one of the countries in South America where Bitcoin and cryptocurrencies are most widely used. However, the country does not have any specific legislation in this regard, but some existing regulations have been applied to crypto assets. For its part, Spain’s financial authorities warned against the use of cryptocurrencies and the ICO from 2018. Beyond these restrictions, there are only partial regulations.

Another country included in this survey is Venezuela, which in theory has regulated almost all cryptocurrency-related activities in the country since 2018.

Laws and decrees began in February with mandatory domestically registration of cryptocurrency mining by the Blockchain Observatory, which was set up specifically as a government oversight for the use of this technology in the country.

In short, cryptocurrencies are well received in Latin American countries, but they don’t yet have specific legislation regulating them.