Panama’s President Blocks Crypto Bill as FATF Pressure Mounts
Panama’s President Laurentino Cortizo has partially vetoed a bill that would have made it easier for the Central American country to adopt cryptocurrency. Cortizo said the bill, which was approved by the country’s legislature in April, needs to adhere to guidelines recommended by the Financial Action Task Force ( FATF).
The FATF is an intergovernmental financial-crime watchdog that had already voiced concerns about Panama’s policies and about money laundering involving cryptocurrency.
Panama Remains on FATF’s Grey List
Panama, which ranks among the top countries for money laundering and terrorism financing, was added to the FATF’s “grey list” in mid-2019. At the time, Panama’s financial leaders “made a high-level political commitment to work with the FATF and GAFILAT to strengthen the effectiveness of its AML/CFT regime,” according to FATF.
However, the country has since remained on FATF’s grey list. Earlier this year, the FATF asked Panama to provide an “action plan” by June detailing how the country plans to combat money laundering and terror financing. A deadline that Panama missed.
In its latest announcement, the intergovernmental watchdog included Panama on its list and urged the country to complete its action plan by June. “The FATF strongly urges Panama to swiftly demonstrate significant progress in completing its action plan by June 2022 or the FATF will consider next steps,” the task force said.
The FATF is an intergovernmental organization tasked with combating money laundering and terrorist financing. The watchdog has maintained a “black list” as well as a “grey list” since 2000. Countries on the grey list face restrictions in the financial services sector, while those on the black list may be subject to economic sanctions by members of the FATF.
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Panama’s President Vetos Crypto Bill
Amid the increasing pressure from the FATF, Panama’s President has recently struck down Bill No. 697 dubbed the “Crypto Bill,” which would have allowed citizens of the Central American country to use cryptocurrencies as a form of payment.
The move was not entirely unexpected as the president had previously expressed his skepticism. While speaking at the Bloomberg New Economy Gateway Latin America conference last month, Cortizo said:
“If I’m going to answer you right now with the information that I have, which is not enough, I will not sign that law. I have to be very careful if the law has clauses related to money laundering activities or anti-money laundering activities. That is very important for us.”
According to local press La Prensa, which has reportedly obtained a copy of the 32-page veto, Cortizo vetoed the law on the grounds that it “requires adaptation to the norms that regulate our financial system.” The president also wrote that it was “imperative” that crypto bills abide by the FATF instructions.
The bill was approved during a plenary session of the Legislative Assembly by a 40-0 vote in late April.
Congressman Gabriel Silva, who presented the bill, tweeted on June 16 that the veto was “a lost opportunity to create jobs, attract investment and integrate technology and innovation in the public sector. The country deserves more opportunity and financial inclusion.”
Nevertheless, the veto sends the bill back to National Assembly, the country’s legislative assembly, where it will be discussed again. Silva noted that they will make corrections but need to “keep the law competitive.”
Meanwhile, the FATF has long been an advocate of bringing regulatory oversight to crypto. Back in 2020, the watchdog introduced the Travel Rule, formally known as FATF Recommendation #16, which orders virtual asset service providers (VASPs) to share the information of the originators and beneficiaries of crypto transactions that exceed a certain threshold.
And in its updated guidance for crypto firms released in October 2021, the FATF said VASPs “are subject to the same relevant FATF measures that apply to financial institutions.” However, some crypto companies called the regulation proposals flawed.
Do you think Panama’s assembly will find a way to get the bill passed in the future? Let us know in the comments below.