Five years ago, I moved to Panama. Before picking the country as my base, I considered several different jurisdictions. But after going through all the options, the decision was clear—Panama was far and away the best choice.

Not only is Panama the most developed country in the region, but the weather is great, the currency is pegged to the dollar, and we’re just a nonstop flight away from family if necessary.

On top of the great lifestyle benefits, the country hosts a strong, stable economy and attractive business incentives. Being here feels almost like being in the US, but with a significantly lower cost of living.

For years, Panama has attracted a wide range of businesses and investors to its shores for these and many other reasons, and today the country has all the makings of an excellent hub for crypto… except for one thing.

Read on below to find out why Panama is one of the best jurisdictions for entrepreneurs and investors in crypto, as well as what’s holding it back.

Panama is a Great Place to Start a Business

Panama has long been known for its open attitude towards foreign investment and businesses—as a small country on the isthmus between North and South America, international trade represents a large portion of Panama’s economy.

It has a vibrant financial sector which is efficiently regulated, well managed, and governed by strict laws ensuring financial privacy and confidentiality. Similar to Switzerland, Panama has a strong and vibrant banking sector. But unlike Switzerland, Panama has reasonably priced corporate and legal services, which make starting and operating a business here simple and cost-effective.

Unlike most international destinations, Panama has the added benefit of using the US dollar. While Panama does have its own currency, the Balboa, the US dollar is accepted at every business and banking institution in the country, making it the de facto national currency.

Panama Has a Favorable Tax Regime

One of the most attractive features about this jurisdiction is its system of territorial taxation, which applies to both Panamanian citizens and residents.

Under a territorial tax regime, residents are taxed only on the income earned within the country. In other words, if you own a digital business that is earning money outside of Panama your company’s effective tax rate will be 0%.

And that’s not just for corporations, Panama’s territorial taxation also applies to income tax, capital gains, local taxes and inheritance tax for individuals. This makes Panama an excellent residency choice for anyone who generates income streams from international sources, which accounts for most cryptocurrency investors.

Panama is in a Great Location

Panama is at the intersection of the world—perfectly situated between North and South America.

This places it just a single flight away from most major cities in the US and on the same time zone. Making it a great offshore base that still enables you to work alongside the US markets.

On top of that, you have tropical weather all year long, with temperatures usually in the range of 75 to 85 degrees.

Why Panama Isn’t a Crypto Haven… Yet

While Panama is clearly a great option for most businesses, crypto-related businesses must also consider how crypto-friendly a jurisdiction is.

Unfortunately, in the case of Panama, the authorities have not issued any guidance on what crypto activity is legal and what is not. Privately, most regulators want to embrace crypto-related businesses. Publicly, however, these same officials are muted, fearful that crypto-related businesses will bring unwanted attention to Panama. With elections coming up next year, it’s unlikely that a formal decision will be made anytime soon.

Also, I wouldn’t be doing my job if I didn’t mention another major problem for crypto-related businesses in Panama: Banking KYC/AML has become ridiculous.

While Panama’s banking laws are generally supportive of account holders, banks are under tremendous pressure to prove their compliance. This is the result of the poorly branded Panama Papers, which were released in 2015 and put Panama’s banking sector under the microscope of international regulators.

Anyone who thinks that opening a bank account is easy in Panama has obviously never tried. Unlike the US, where you can enter a bank, open a new account, and leave with a new toaster in about 20 minutes, in Panama the account opening process can be long and painful. It took me several months and cost me thousands of dollars in accounting fees and worthless bureaucratic stamps to get an account opened.

What Does This Mean for Crypto Law Insiders?

Ultimately, I don’t believe Panama will live up to its potential and become the crypto hub it should be.

The lasting impact of the Panama Papers seems to have local regulators nervous to push the boundaries on anything that could earn them negative attention. And given the reaction of the EU to Malta, I can’t imagine Panama wanting to attract a similar response.

Having already been put on the OECD “grey list” a few times by France and Spain, I expect that local officials will choose to lay low despite the great opportunity that crypto could bring to Panama.

This doesn’t mean that some crypto-related businesses won’t operate here regardless. They will. But their numbers will be limited and crypto will remain largely a fringe industry in Panama.

Eventually, Panama will regulate crypto, and likely in ways that mimic whatever the US decides to do. By then, of course, the opportunity for Panama to be a crypto hub will be long gone as early movers like Malta and Switzerland will have captured all the action.

Fortune favors the bold. Panama is not bold. So for now, crypto-related businesses should look elsewhere when seeking regulatory clarity.

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