Panama has passed a new cryptocurrency bill making the technology exempt from capital gains tax.

Panamanian Congressman Gabriel Silva introduced the cryptocurrency regulation bill that passed on Thursday.

However, the new law does not make bitcoin legal tender in Panama.

“We can’t just establish bitcoin because that will be unconstitutional and if it’s unconstitutional, then the project won’t happen,” said Silva.

Officially, Panama uses the U.S. dollar for more than a century but has no currency per its constitution.

Prior to the recent legislation, it was illegal for cryptocurrency companies to operate in Panama.

Furthermore, the law makes crypto assets foreign-source income, which means it will not be taxed on capital gains.

“The idea is to just respect the tradition that Panama has already had for many years, where the country taxes what happens inside of its borders, and the internet is obviously not in any country’s borders,” said Felipe Echandi, a crypto entrepreneur who helped Silva in drafting the bill.

President Laurentino Cortizo has not officially signed the bill yet, but the legislation was passed unanimously in a 40-0 vote, insinuating the law will be signed.

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