Panama City to Accept Cryptocurrency Payments While Settling in US Dollars

Panama City will accept cryptocurrency payments (BTC, ETH, USDC, USDT) for municipal services but must convert these to USD due to legal constraints. Mayor Mizrachi’s initiative reflects broader pro-crypto trends, although past legislative attempts in Panama have failed. The city’s compliance with USD regulations might limit the impact of crypto adoption.

Mayer Mizrachi, the mayor of Panama City, has announced that the city will now accept cryptocurrency payments for taxes and permits, specifically Bitcoin (BTC), Ethereum (ETH), and two stablecoins, USDC and USDT. However, these transactions will be converted to US dollars to comply with legal requirements, limiting actual cryptocurrency adoption in the municipal processes.

This initiative comes amid a global push for pro-crypto regulations, with Panama City becoming the first public institution to embrace payments in cryptocurrency. Mayor Mizrachi noted that citizens will be able to use crypto as a means to settle various municipal fees and fines, following a recent council vote.

Despite this progress, previous legislative attempts to enable wider cryptocurrency acceptance in Panama met with obstacles, leading to a Supreme Court ruling in 2023 that rendered these efforts unenforceable. The city’s current bypass of established legislative procedures could bring significant limitations regarding the effective use of cryptocurrencies in the local economy.

Panama predominantly uses the US dollar as a legal tender despite having its own currency, the balboa, which is pegged to the dollar. While this arrangement mirrors El Salvador’s Bitcoin adoption, it also suggests that Panama’s legal and economic framework heavily favours the dollar, complicating cryptocurrency integration.

Mizrachi expressed that this strategy would enhance the circulation of cryptocurrencies within Panama’s economy. However, the partnership with banks raises concerns regarding how these digital assets will be handled, potentially leading to an oversupply in international markets if not managed correctly.