Bitcoin (BTC-USD) continued a downward spiral on Friday after lawmakers in Panama approved a bill to regulate the use and commercialisation of crypto assets.
On Thursday, the Central American country's National Assembly passed the bill which covers the use and trading of crypto assets, issuance of digital securities, new payment systems and the tokenisation of precious metals — when rights to an asset are converted into digital formats.
The world's biggest cryptocurrency fell below the key $40,000 (£31,825) level as the bill opens the door to private and public use of crypto assets. It fell 2.5% to $38,715, while ethereum (ETH-USD) was down 2.8% to $2,846 at the time of writing.
Read more: Live crypto prices
If the proposal is signed into law by Panamanian president Laurentino Cortizo, citizens will be able to buy goods and services and pay taxes using cryptocurrencies. It was passed with 38 votes in favour, two abstentions and no votes against.
"This bill seeks for Panama to become a hub of technology innovation in Latin America," said Gabriel Silva, a member of the National Assembly and one of the lawmakers promoting the bill.
It aims to promote "the use of distributed ledger technology and blockchain in the digitalisation of the identity of natural and legal persons in or from the Republic of Panama and as a means to make the public function transparent," a translated version of the project said.
However, analysts have warned the move could heighten Panama's reputation as a place lacking financial transparency as the country is on the European Union's list of tax havens.
"Panama was already in a bad position and these payment methods skip the due diligence processes that international organisations are asking Panama to embrace," said Romain Dromard, CEO at financial investment advisory firm K&B Family Office.
Silva added that the project goes beyond regulating individual tokens, aiming to provide a broader scope than El Salvador’s bitcoin as legal tender measure that was passed last year.
It comes after the Central African Republic became the second nation to adopt bitcoin as legal tender. The African country also plans to create a legal framework around the use of cryptocurrencies, focussing on defining how citizens can interact with digital assets.
In September 2021, El Salvador became the first country in the world to adopt the crypto as a legal tender.
Meanwhile, Goldman Sachs (GS) offered its first bitcoin-backed loan in the latest sign that Wall Street is more open to adopting cryptocurrencies.
The US multinational investment bank's move follows other traditional finance giants moving further into the crypto market. Last month, Cowen (COWN) launched a digital assets unit and BlackRock (BLK) participated in the $400m funding round for USDC stablecoin creator Circle.