Panama City Approves Crypto Tax Payments Including BTC and ETH

Panama City has taken a groundbreaking step toward mainstream cryptocurrency adoption, with its city council voting on April 15, 2025, to accept Bitcoin (BTC), Ethereum (ETH), USD Coin (USDC), and Tether (USDT) for taxes, permits, fines, and other municipal fees. Announced by Mayor Mayer Mizrachi, the initiative positions Panama's capital alongside other global cities integrating digital assets into public finance. By partnering with a local bank to instantly convert crypto payments into US dollars, the city navigates legal hurdles while embracing decentralized payment options.

To comply with Panamanian law, which mandates government transactions in US dollars, Panama City has partnered with a local bank to convert crypto payments to fiat instantly. Mayor Mizrachi explained, "Legally public institutions must receive funds in dollars, so we partner with a bank who will take care of the transaction receiving in crypto and convert on spot to dollars." This workaround eliminates the need for new legislation, allowing Panama City to adopt crypto while adhering to national regulations. "This allows for the free flow of crypto in the entire economy and entire government," Mizrachi stated.

Following the announcement, the prices of BTC and ETH showed no significant changes. This suggests that markets view Panama City's move as a localized development, though it may bolster long-term confidence in cryptocurrency's utility for real-world transactions.

Beyond Panama, several cities and regions worldwide have begun accepting cryptocurrencies for taxes and administrative fees. The U.S. state of Colorado started accepting crypto for taxes in September 2022, also utilizing instant fiat conversion. In December 2023, the Swiss city of Lugano announced that Bitcoin could be used to pay taxes and city fees. In the United States, North Carolina legislator Neal Jackson proposed the "North Carolina Digital Asset Freedom Act" on April 10, 2025, which would recognize cryptocurrencies as an official payment method for taxes. Unlike El Salvador's 2021 decision to adopt Bitcoin as a legal tender, a move criticized for its volatility—Panama City's model is optional and conversion-based, minimizing financial risk.

Nationally, Panama has been debating a crypto bill since 2022 to establish a legal framework for blockchain and digital assets. However, legislation has faced delays in the Senate due to constitutional and central bank concerns. Panama City’s bank-conversion model bypasses these obstacles, providing a pragmatic path to crypto adoption without requiring national approval.

As Latin America's blockchain ecosystem expands, Panama City's initiative underscores the transformative potential of crypto in public finance. However, some voices question the necessity of governments accepting cryptocurrency for public services. A recent report from Colorado, the first to accept crypto payments for public services in 2022, noted that few residents have used cryptocurrencies to pay taxes in practice. Supporters argue that Panama's acceptance of crypto assets for public services can simplify transactions for Panamanian citizens, half of whom lack bank accounts.