Bill 454.

Summary.

The bill establishes a licensing and supervisory regime for natural or legal persons that provide virtual asset services to third parties as a business in the Republic of Panama. It links the sector to the prevention of money laundering, terrorist financing and the financing of the proliferation of weapons of mass destruction. It provides that regulation and supervision must take account of risk, proportionality, the economic function of assets, user protection, financial integrity, technological neutrality and international cooperation.

It defines categories of virtual assets, including commodity-type assets, virtual securities, utility assets, cryptocurrencies, and backed or algorithmic stable assets. It also defines backing reserves, smart contracts, platforms, protocols, digital identity and tokenization. For undefined terms, it refers to Law 23 of 2015 and other applicable legislation. It allows people to agree voluntarily to use virtual assets as a means of payment in civil or commercial transactions, subject to compliance with prevention and due diligence rules.

The General Directorate of Financial Enterprises of the Ministry of Commerce and Industries (Ministerio de Comercio e Industrias) would supervise providers through inspections, requests for records and interviews, and could impose sanctions and establish controlled testing environments. By reasoned resolution, it could temporarily restrict or prohibit certain operations or technologies on the grounds of the risks specified in the bill. The Executive Branch (Órgano Ejecutivo) would work with the Directorate and the Public Prosecutor’s Office (Ministerio Público) to investigate crimes involving virtual assets and would define policies to detect and investigate their misuse.

Providers would have to maintain a written, risk-based prevention program covering due diligence, beneficial owner identification, transfer controls, a compliance officer, annual training and independent audits. They would have to report suspicious transactions immediately to the Financial Analysis Unit (Unidad de Análisis Financiero) without disclosing the report, retain records for 5 years, protect their systems, handle complaints and cooperate with authorities. Users of licensed providers would have rights to information, protection of assets and data, complaint handling and remedies under the applicable liability regime. The Directorate would maintain a free public register of providers.

For transfers of 5,000 balboas (B/.5,000.00) or more, the originating provider would have to obtain, verify and transmit information about the originator and beneficiary. Controls would also be required to detect split transactions under regulations issued by the Directorate of Financial Enterprises (Dirección de Empresas Financieras). Exchange platforms would be subject to segregation and proof-of-reserves requirements, cybersecurity audits, and policies against manipulation, insider trading and conflicts of interest.

The license, processed online, would cover exchange, custody, administration, transfers and services connected with virtual asset offerings. Applicants would have to identify those who control the provider, demonstrate fitness and financial soundness, submit a compliance manual, and describe their technology, assets, services and protective measures. Errors could be corrected within 30 business days. The license would cost 1,500 balboas (B/.1,500.00); the Executive Branch would set renewal terms, additional registrations and supplementary requirements. The bill also provides for recognition of foreign licenses through a lower-cost procedure. Companies already operating would have 8 months, once regulations are established, to obtain a license. The Executive Branch would issue implementing regulations within the first 90 days after the law takes effect, which is scheduled for 2 months after its promulgation.

The bill concerns the Ministry of Commerce and Industries, the General Directorate of Financial Enterprises, the Directorate of Financial Enterprises, the Executive Branch, the Public Prosecutor’s Office and the Financial Analysis Unit. It could be of interest to providers, exchange platforms, virtual asset issuers, users, and the payments, investment and financial services sectors in Panama.