Cryptoassets, Non-Custodial Platforms, and Legal Certainty in Panama: Scope and Limits of the Securities Market Law

Carlos Abrego Dávila · Founding Partner

ONE OF THE MAIN CHALLENGES facing technology and fintech companies operating with cryptoassets in Panama lies not in technological innovation itself, but in accurately determining their regulatory classification.

In particular, business models built around non-custodial platforms often face a fundamental question from the earliest stages of development: do these activities constitute regulated securities intermediation, or are they merely technological infrastructures operating outside the scope of securities regulation?

The answer determines whether a project requires licensing, regulatory capital, supervision, and a compliance framework, or whether it may operate without those requirements.

With this question in mind, Arias, Abrego & Lopez submitted a formal request for a regulatory opinion to Panama's Superintendency of the Securities Market (SMV), on behalf of a Panamanian technology company whose identity remains confidential.

The company operates a digital platform designed to facilitate the exchange of cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) under a strictly non-custodial model.

Non-custodial means that the platform never takes possession of users' funds or cryptoassets. Each user retains control of their own wallet and private keys, and the company never handles those assets.

The SMV's response, Opinion No. 04-2025, dated August 27, 2025, represents one of Panama's most significant administrative opinions concerning cryptoassets, not only because of its conclusion, but also because of the strength of the legal reasoning supporting it.

The Business Model: Technology Without Financial Intermediation

The model submitted to the regulator presents clearly defined technical characteristics: the company does not receive funds from the public, manage investment accounts, provide financial advice, or act as a custodian of cryptoassets.

Its role is limited to providing technological infrastructure — a digital interface that allows users to interact directly with decentralized exchange protocols (DEXs), while retaining exclusive control over their wallets and private keys at all times.

From a legal perspective, this architecture falls outside the traditional circumstances that justify securities market regulation.

There is no solicitation or pooling of public savings, no issuance of securities, and no creation of debt or equity rights against an identifiable issuer.

The activity takes place in the spot market for native cryptoassets, meaning the direct purchase and sale of the underlying assets, without structuring financial products or tokenizing traditional securities.

Against this factual background, the central question submitted to the SMV was whether a non-custodial technology platform facilitating cryptocurrency exchanges could be considered a securities market activity under Decree Law No. 1 of 1999.

Regulatory Framework and the Scope of the SMV's Authority

In addressing the request, the SMV begins with a fundamental institutional premise: its jurisdiction is strictly defined by Panama's Securities Market Law, which regulates activities involving securities and financial instruments.

Historically, these categories have been based on the existence of an issuer raising capital from the public and investors acquiring debt or equity rights.

The regulator's analysis focuses on the statutory definitions of securities and financial instruments, emphasizing that both presuppose an underlying legal relationship — contractual or otherwise binding — between identifiable parties.

From this perspective, the SMV concludes that cryptocurrencies such as BTC and ETH, in their native form, do not represent rights against an issuer, do not create enforceable obligations, and do not constitute equity or debt instruments.

This reasoning is further supported by technical references to international standards, including the position of the IFRS Interpretations Committee, under which cryptocurrencies do not qualify as financial instruments pursuant to IAS 32, as well as comparative regulatory practices in other developed jurisdictions.

Comparative Law and the Liechtenstein Precedent

As part of the submission, our firm supported its legal analysis with an opinion issued by Liechtenstein's Financial Market Authority (FMA) concerning a functionally equivalent business model.

This comparative law exercise helped illustrate a distinction that is now widely recognized internationally: providing custody, intermediation, or structured financial products involving cryptoassets is fundamentally different from merely supplying technology that enables access to decentralized markets.

The SMV implicitly adopts this approach and aligns its reasoning with regulatory developments involving IOSCO, the Financial Action Task Force (FATF), the OECD, and the European Union.

It also recognizes that many jurisdictions have chosen to develop dedicated regulatory frameworks for cryptoassets rather than forcing these activities into securities laws originally designed for fundamentally different financial arrangements.

The SMV's Conclusion: Legal Clarity Within Defined Boundaries

The Superintendency's conclusion is clear and technically consistent: cryptocurrencies such as Bitcoin and Ethereum, when used within a non-custodial model without ancillary financial services, do not qualify as securities or financial instruments under Panama's Securities Market Law.

Consequently, the activities described do not constitute securities intermediation, investment advisory services, investment account management, or custody of financial instruments.

They therefore do not require licensing or supervision by the SMV, provided the business model remains within the parameters examined in the opinion.

Importantly, the opinion emphasizes that this conclusion does not imply a complete absence of regulation.

Other legal frameworks may still apply, including anti-money laundering requirements, consumer protection laws, cybersecurity obligations, and tax regulations, even where the activity falls outside the scope of securities market regulation.

The opinion addresses a specific business model operating within defined parameters; it does not grant blanket authorization to an entire industry. Asset custody, conversion into fiat currency, payment of yields, derivatives, and tokenization are functionalities outside the scope of the analysis and require separate legal assessment.

This limitation deserves particular attention because it carries significant practical consequences.

An administrative opinion addresses a specific request based on a specific set of facts. Its relevance depends on the business model continuing to operate within the circumstances originally examined.

Introducing private-key custody, offering conversion into U.S. dollars through the company's own accounts, paying returns on customer balances, or adding products involving exposure to an issuer are decisions that change the nature of the activity and reopen the regulatory question addressed by the opinion.

One particularly valuable aspect of this decision is that the SMV's full opinion is publicly available, strengthening institutional transparency and providing practical guidance for entrepreneurs, investors, and legal advisors evaluating similar business models.

In an environment where regulatory uncertainty is often a major deterrent to investment, publicly available administrative interpretations of this nature contribute to greater predictability and confidence.

The Broader Regulatory Context

This interpretation did not emerge in isolation.

Since Opinion No. 07-2018, the SMV has maintained that cryptocurrencies do not fall within the statutory definition of securities.

In 2023, the regulator further clarified that companies operating exclusively with virtual assets do not require a securities brokerage or investment advisory license.

What Opinion No. 04-2025 adds is the application of that established position to a specific technological architecture: an interface connecting users directly to decentralized protocols without taking possession of their funds, together with a more developed explanation of the legal reasoning supporting that conclusion.

This consistency matters because Panama still lacks dedicated legislation governing virtual assets.

The bill approved by the National Assembly in 2022 was challenged by the Executive Branch and subsequently declared unconstitutional by the Supreme Court in 2023 on procedural grounds. Subsequent legislative initiatives remain under consideration.

Seven years of consistent administrative interpretation in an area without specific legislation is, in itself, a meaningful factor for businesses evaluating where to establish their operations.

The cryptoasset ecosystem will continue to evolve, and Panama, like other jurisdictions, will eventually need to adopt a dedicated regulatory framework.

In the meantime, administrative opinions such as this demonstrate that responsible innovation is possible within clearly defined legal boundaries, without resorting to interpretations that distort the purpose or scope of existing legislation.

For companies currently considering Panama as a base of operations, the message is clear: legal certainty is achievable, provided the business model is properly designed, thoroughly assessed, and supported by sound legal analysis.

To discuss whether a particular business model falls within the parameters examined by the SMV, please contact us at [email protected].