Cryptocurrencies in Panama

Recently, Panama innovated in the world of cryptoactives by approving a bill on the cryptocurrencies regulation. However, in this article we explain what exactly the bill is, which is its current state, and how is it quantified.

What is the Bill 697 of cryptocurrencies?

The Cryptocurrency Bill in Panama consists of the expected regulation of cryptoactives, with the aim of providing the cryptocurrency ecosystem with legal certainty and clarity, while encouraging its use.

The law comprises different points, the most important being:

• The regulation of cryptocurrencies in Panama as a means of payment, as is allowed in other regions such as the United States and Europe.
• Attract companies that deals with cryptocurrencies and blockchain to Panama, with the creation of specific licenses.
• The possibility that the government can use blockchain technology, such as Smart Contracts, for example, for the digitization and optimization of processes in the Public Administration.
• In addition, other important points are considered, such as the interoperability of banks with cryptocurrencies or the possibility of not paying taxes on capital gains from cryptocurrencies in Panama.

Changes for adaptation to the financial system and FATF recommendations

Following the approval of this bill, it has been decided to carry out a more in-depth review. Among the reasons given in an extensive analysis of the bill sent to the National Assembly, the need for the regulation to adopt the recommendations of the Financial Action Task Force (FATF) is mentioned, which would mean including changes aimed at preventing money laundering and avoid the possible unlawful uses of cryptocurrencies, since the Panamanian State has defined a policy of fiscal transparency and prevention of money laundering with the aim of fighting against the image of the country, which is that it is a tax haven, and thus being taken off the FATF list of countries with deficiencies in the prevention of money laundering.

In this way, the Bill is being reviewed so that the FATF recommendations are reflected and that it is better adapted to the Panamanian financial system.

Cryptocurrency accounting in Panama, is it a need?

The rapid advances in the regulation of cryptocurrencies in Panama and the increase in their use by more and more individuals and businesses, makes it inevitable that cryptocurrencies are increasingly present in the accounting of the Panamanian company and, therefore, are increasingly most important to users of accounting.

Fortunately, although the regulation is not ready, the cryptocurrency accounting regulations are more advanced, so we can prepare financial statements without having any type of insecurity about the regulations. However, it is important that the financial team of the company is aware of these rules in order to prepare reports and financial statements free of error and that they represent the true image of the company and confirm the International Financial Reporting Standards (IFRS).

For the accounting of cryptocurrencies, we must refer to the IFRS and the consultations posted by the organization on topics related to the matter.

In this case, based on the different queries published, currently the accounting of cryptocurrencies would be carried out as follows:

• Qualification as inventories in case the company's activity consists of the exchange of cryptocurrencies (IAS 2).
• Intangible assets when acquired for speculative or investment purposes (IAS 38).

Conclusion

Despite the review and delay in approval of the Panama Cryptocurrency Bill, there are two undeniable facts. First, the law on cryptocurrencies in Panama is necessary to provide legal certainty to the crypto ecosystem, although it will not be approved as soon as initially expected, and second, the mainstream adoption of cryptocurrencies in Panama will cause companies to be aware of the cryptocurrency accounting with the aim of continuing to produce financial statements in line with accounting standards and faithful to the image of the company.

OMAR CAMERO Contador Público Autorizado Socio Director de Camero, Camero & Asociados..