Panamanian President Partially Vetoes Crypto Regulation Legislation

Panama President Laurentizo Cortizo partially vetoed on Wednesday a bill regulating the use of crypto as a means of payment for any transaction.

“Although it is a novel proposal, the legislative initiative requires adaptation to the norms that regulate our financial system and the monetary model that has guaranteed economic stability and fiscal discipline in the country,” Cortizo argued in his veto, which runs to 32 pages.

Among other remarks, Cortizo said it is “imperative to conform the new regulation with FATF [Financial Action Task Force] recommendations.”

Cortizo did not veto the entire bill, however, and the items to which he objected will now be debated by the Panamanian Congress.

Cortizo's partial veto comes in the context of Panama's presence on the “gray list” created by the FATF, which in March asked the Central American country to provide an "action plan" to address its concerns by June.

Gabriel Silva, the congressman who authored the bill, tweeted on Thursday that the veto “is a missed opportunity to generate jobs, attract investment and incorporate technology and innovation in the public sector.”

According to Silva’s tweets, the Government Committee of the Panamanian Congress will discuss the points considered unconstitutional by Cortizo, while the Commerce Committee will address the points Cortizo considers impractical. The bill then must go through a second and third debate, where only the vetoed points will be voted on.

“We are studying the veto to make corrections, but we must keep the law competitive,” added Silva.

In May, Cortizo said that he was likely to veto the bill, even though he described it as a good law at the time. “I have to be very careful if the law has clauses related to money laundering activities or anti-money laundering activities,” Cortizo said at that time.

The bill was initially approved by the Panamanian Congress on April 28 by 40 votes in favor and none against.

In addition to regulating the use of crypto for transactions, the original bill was crypto-friendly from a tax perspective, as it treated crypto assets as foreign-source income, meaning there were no taxes on capital gains, among other benefits.