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  • Panama has approved a bill regulating the use of bitcoin and cryptocurrencies as payment.
  • The goal is to foster job creation and make the country a leading technology hub in Latin America, a Congressman said.
  • There will be no capital gains tax on bitcoin investments.

Panama has unanimously approved overhaul legislation to regulate the Bitcoin and cryptocurrency markets in the country in a move that takes the burgeoning industry out of a current gray zone.

The new legislation regulates the trading and use of cryptocurrencies, the issuance of digital value, tokenization of precious metals and other assets, payment systems and dictates other provisions, the country’s Legislative Assembly tweeted on Thursday.

“This bill seeks to convert Panama into a technology innovation hub in Latin America,” said Congressman Gabriel Silva in a Thursday interview after the approval of the bill. “This is a step forward that seeks to mobilize the economy and create jobs.”

The bill seeks to provide regulatory clarity for the optional usage of cryptocurrencies as payment in Panama, Silva added. Moreover, the goal is to incentivize foreign companies to open offices in the Central American country as well as to foster local entrepreneurship in the cryptocurrency services business. The country's territorial tax system will also apply to Bitcoin, meaning there will be no capital gains tax on investments in the peer-to-peer currency.

“Over 50% of Panama’s population doesn’t have a bank account,” Silva said. “This helps people participate in the digital economy and receive payments from tourists that come to Panama. It helps in the financial inclusion of Panamanians.”

The bill now heads to Panamanian President Laurentino Cortizo’s desk, where he’ll have the option to veto the proposal or sign it into law.

Despite creating a framework for the usage of bitcoin and cryptocurrencies as payment methods in the Panamanian economy, the country is not making bitcoin a legal tender to the likes of El Salvador or the Central African Republic.

El Salvador became the first country in the world to adopt bitcoin as a legal currency last year, and the Central African Republic yesterday became the second nation to do so.

UPDATE (Apr 28, 2022 - 4:26 p.m. ET): Adds capital gains tax information on third bullet point and fourth paragraph.