Panama Crypto Crackdown: Stricter AML Restrictions on Horizon

During his participation in the Bloomberg Latin America conference in Panama City, President Cotizo delivered a speech. He does not oppose cryptocurrencies but insists that the market adheres to international AML standards. He said,

“I will not sign the law if I can’t convince you with the information I have at this time. If the law includes provisions on money laundering, I must exercise extreme caution. Our society places a high value on the fight against money laundering.”

A lawmaker even proposed legislation that would have made bitcoin legal tender, but the idea never saw daylight. Instead, the national assembly approved a law that allows the use of cryptocurrency to pay for various goods and services. It also intends to establish a government-issued digital wallet to bolster the legitimacy of this process.

Panama Delays Cryptocurrency Legalization

Panama announced a few months ago that it would work harder to keep track of all digital assets and foreign exchange assets in the country. The president must sign the bill before it becomes a law. However, this has not been implemented. The president believes that having laws against money laundering is critical because the number of cases is increasing.

There have been links between several money-laundering crimes to the cryptocurrency industry. Therefore, cryptocurrency crime is one of the primary reasons the president will not sign the bill. In addition, Panama is now on the FATF list of countries with restrictions to prevent money laundering. However, the president has stated that the government is investigating what types of laws might work and will make appropriate recommendations.

The Reason Behind The Unsigned Law?

Laurentino Cortizo, the president of Panama, has stated that he will not sign a law regulating cryptocurrencies unless it includes stricter rules to prevent money laundering. However, for the bill to become law, the president must sign it. Cortizo’s dissatisfaction has to do with how well the bill adheres to anti-money laundering cryptocurrency regulations around the world. 

Cortizo went on to say that money laundering is a major concern for him and his country. Cortizo believes that crypto laws are “innovative,” but he emphasizes that the asset class of cryptocurrencies requires global regulation.

He made it known that it is a new law based on what he had seen so far. He believes it’s a good one. Panama has a strong financial system, and the country is looking forward to the global regulation of crypto assets. This could be because Panama is on the Financial Action Task Force’s list of countries with “strategic deficiencies” in combating money laundering. 

Even if Cortizo disagrees with the task force’s recommendations, he will not back down from his promise to put the task force’s recommendations into action and tighten controls on illegal money. Cortizo is aware that drug traffickers and cartels from Colombia and Mexico have some interest in Panama. This is because it has a dollarized economy and a strong financial services sector. As a result, Cortizo has stated that he may sign some parts of the law and leave the rest. However, he is waiting for instructions from his legal department before taking further action on the Panama cryptocurrency crackdown.

New Update Leaves Exchanges Uncertain

This is a crucial rule for the government. This is because anyone desiring to transfer funds internationally can do so by using cryptocurrencies. In addition, cryptocurrency is widely accepted as a viable option for improving the nation’s financial system. Banks are likely to adopt digital assets, providing custody services for those who lack access to wallets and similar services. While some legislators believe that adopting cryptocurrency will benefit the country, others are concerned about cryptocurrency restrictions.

In Panama, the demand for cryptocurrencies and NFTs has continued to rise. Despite the market’s collapse, the traders continue to accumulate wealth. Soon, the country is also considering adopting blockchain technology.

Cryptocurrency Rousing Interest in Lawmakers

Panama is one of the recently added countries to the list seeking to implement blockchain technology and cryptocurrencies. El Salvador is at the top of the list despite having mixed results in its trials.

Recently, there was a report that the Central African Republic had made bitcoin legal tender. This prompted the International Monetary Fund (IMF) to state that the move could pose economic risks. Some nations have expressed interest in using blockchain technology and cryptocurrencies to boost their economies. However, they are not yet prepared to legalize bitcoin.

Instead, they are attempting to find a compromise that will benefit the market by allowing the use of blockchain or crypto technology with restrictions. As a result, this time of the year is anticipated to be favourable for crypto adoption, even though prices may not reflect this.

Importance and Danger of Cryptocurrency Regulation

Any newly-implemented regulatory system will have both benefits and drawbacks. For example, in the United States, the dispersion of the federal regulatory system with numerous national regulatory bodies could pose a challenge. 

Regulators must strike a balance between protecting consumers and investors by imposing regulations and stifling innovation or creating more efficient financial markets that could spur growth and provide citizens with opportunities. 

Blockchain and digital technology can provide several benefits that will improve the monitoring and protection of the financial system against abusive and illegal activities, such as money laundering, tax evasion, and fraud.

These tools can significantly improve the system’s efficiency and security if used properly. However, companies are responsible for establishing and adopting guidelines for best practices and ethical behaviour that enable these technologies to provide the benefits they are capable of.

The absence of a regulatory framework for crypto-assets has increased the risk of fraud and eroded investor confidence. A more thorough, comprehensive regulatory framework for crypto assets could bring numerous benefits to the financial sector and investors worldwide in the long run. For example, it will contribute to the development of technology, restrict the use of crypto assets for illegal or fraudulent transactions, and reduce the risk of cyberattacks.

Conclusion

Panama’s bill contains similar stipulations as its neighbour El Salvador’s Bitcoin Law. It would also enable government agencies to migrate public records to blockchain technology, a move many consider would transform the country into a digital hub in Latin America and attract investments from financial technology companies.