Panama Strengthens its Legal Framework: How Virtual Asset Regulation Impacts Investors in 2025?

Panama, a strategic hub for international entrepreneurs and investors, is at a crucial point in its regulatory evolution. As the global financial landscape embraces new technologies, the need for robust and clear legal frameworks for virtual assets becomes imperative. The recent initiative to establish a virtual asset law in Panama not only seeks to align the country with international standards but also reinforces its position as a transparent and secure jurisdiction. This development is of vital importance for anyone considering moving their tax residency or establishing businesses on the Isthmus, as solid regulation promises stability and confidence for investment.

At Panamaway, we understand that trust and legal clarity are fundamental pillars for your investment and residency decisions. Therefore, we break down the proposed virtual asset law and explore how this strategic initiative will affect Panama’s business and financial ecosystem in the lead-up to 2025 and beyond, especially in its relationship with the Financial Action Task Force (FATF).

Panama’s Strategy to Safeguard its International Financial Reputation

Panama’s recent history with the FATF has been a testament to its commitment to transparency and the fight against money laundering and terrorist financing. Having exited the “grey list” in 2023 and the European Commission’s high-risk list in 2025, the country has demonstrated strong political will and capacity for action. However, the work is not over. With a new FATF review scheduled for 2027, Panama is proactively addressing outstanding recommendations, particularly those related to virtual assets.

The proposed draft law, driven by Panamanian lawyers with the backing of the Panamanian Capital Market Association (Apamec), is a direct response to this challenge. It seeks to create a comprehensive regulatory framework that not only complies with FATF standards but also positions Panama as a leader in financial innovation in the region. This strategic vision is key to maintaining and strengthening the confidence of the global investment community.

“Panama cannot be left behind. It is necessary to generate clear rules, foster transparency, attract responsible investment, and pave the way for a safe and inclusive digital environment.” – Patricia Boyd, President of Apamec.

Understanding the Proposed Virtual Asset Law in Panama

The essence of this proposal lies in the creation of a regulatory framework that is inclusive, innovative, and sustainable, aligned with the highest international standards. Successful models from the European Union, Brazil, and Argentina have been taken as reference, adapting them to the peculiarities of the Panamanian market. This approach ensures that the regulation of virtual assets in Panama is not only reactive to international demands but also a driver of development.

Key components of the proposal include:

Clear Definitions and Precise Classification: The law seeks to establish clear categories for different types of virtual assets, avoiding legal loopholes and providing legal certainty.
Competent Regulators and Risk-Based Approach: It will specify which entities will be responsible for supervising this market and how a risk methodology will be applied, as recommended by international bodies.
Regulatory Sandbox: The creation of a controlled environment for innovative technological projects to experiment under supervision, thus fostering responsible innovation.
Boost for Financial Inclusion and Attraction of Digital Talent: Beyond compliance, the law seeks to create an ecosystem that benefits the population and attracts qualified professionals.

Classification and Clarity: A Fundamental Pillar

A crucial aspect of the proposal is the differentiation between various virtual assets. As Oliver Muñoz, one of the proposing lawyers, pointed out, “Not all virtual assets are the same. It is necessary to classify them clearly to avoid legal loopholes and ensure that companies in the traditional financial sector can participate under effective regulation.” This distinction is fundamental for a fair and effective virtual asset regulation in Panama, allowing investors to better understand the risks and opportunities.

Controlled Innovation: The Regulatory Sandbox

The establishment of a regulatory sandbox is a clear sign of Panama’s commitment to innovation. This space will allow fintech companies to test new technologies and business models related to virtual assets in a controlled and supervised environment before their large-scale launch. This not only accelerates technological adoption but also ensures that any innovation develops within a framework of security and compliance. This is excellent news for those looking to start a company in Panama with a focus on financial technology.

FATF Compliance: Beyond the Grey List

The main motivation behind this proposed virtual asset law in Panama is to ensure compliance with FATF recommendations 15 and 16. These recommendations specifically focus on the regulation of virtual asset service providers (VASPs) and the prevention of money laundering and terrorist financing in this emerging market. The risk of returning to the “grey list” is a real concern, and Panama is determined to avoid it through robust and well-thought-out legislation.

“If Panama does not comply with these recommendations before the FATF visit in 2027, it runs the risk of re-entering the grey list.” – Oliver Muñoz, Proposing Lawyer.

The experience of other countries, such as Argentina, which had to accelerate their regulations to exit observation situations, underscores the importance of early and consensual action. Panama seeks to design a “tailor-made suit” that is functional and sustainable, instead of improvising a last-minute norm. This demonstrates a maturity and foresight that benefits the entire investment ecosystem and the country’s international reputation. The official FATF website offers more details on these recommendations.

Implications for Investors and Entrepreneurs in Panama

For entrepreneurs and investors who consider Panama as their destination for tax residency in Panama or to expand their operations, this regulatory initiative has profoundly positive implications:

Greater Trust and Legal Certainty: A clear legal framework reduces uncertainty and protects investments in the virtual asset sector.
Attraction of Responsible Capital: Transparency and regulatory compliance attract serious investors and companies, who seek stable and reputable jurisdictions.
Controlled Financial Innovation: The regulatory sandbox and the pro-innovation approach allow for exploring new business opportunities within a secure environment.
Stability of the Financial Ecosystem: By maintaining a good relationship with bodies such as the FATF, Panama strengthens its position as an international financial center, which positively impacts all sectors, including the tax regime in Panama.

The virtual asset law in Panama is not just a compliance measure but a strategy for economic growth and diversification, facilitating a conducive environment for responsible foreign investment and the development of new industries.

Building National Consensus and its Future Impact

The proposal has been shared with key entities such as the Ministry of Economy and Finance (MEF) and the banking and securities superintendencies, seeking a technical and constructive dialogue among all actors in the financial system. This collaborative approach, involving both the public and private sectors, is fundamental for the regulation of virtual assets in Panama to be comprehensive and effective.

The goal is not only to legislate on cryptocurrencies but on the entire vast ecosystem of virtual assets, which includes a variety of digital instruments with legitimate financial uses. This broad approach ensures that the law is relevant in the long term and can adapt to future technological innovations.

Conclusion: A Robust Financial Future for Panama in 2025

The initiative to establish a virtual asset law in Panama is a decisive step towards consolidating the country as a modern, transparent, and reliable financial jurisdiction. By proactively addressing FATF recommendations and fostering responsible innovation, Panama not only protects its international reputation but also creates an attractive and secure environment for entrepreneurs and investors.

At Panamaway, we stay abreast of every legislative evolution and its impact on our clients. If you are considering Panama for your tax residency, company formation, or simply looking to better understand the investment landscape, our team of experts is ready to provide you with the specialized advice you need to navigate this dynamic environment. Virtual asset regulation in Panama is just one more piece of the puzzle that positions the country as a top-tier investment destination.