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The Panama Crypto Foundation

The Panama Crypto Foundation:

Everything you should know

 

This article explores why Panamanian foundations are uniquely suited for DAOs, their regulatory advantages, and provides real-world practical cases for Web3 builders

As DAOs evolve, their legal recognition and structure remain a challenge in many jurisdictions. One solution gaining traction is the use of Panamanian foundations to legally "wrap" DAOs, offering a flexible, compliant, and robust framework for their operation.

Without a legal wrapper, DAOs lack formal recognition under most jurisdictions, creating obstacles such as:

  • Inability to Interact with Traditional Systems: DAOs cannot open bank accounts, own property, or enter contracts as they lack a legal identity.
  • Liability Risks: In the absence of a formal structure, DAO members may face unlimited personal liability for the organization’s actions.
  • Tax Complexity: Managing taxation becomes problematic without a defined legal framework.
  • Regulatory Exposure: DAOs operating in regulated industries—such as finance or healthcare—may face compliance challenges when navigating global legal landscapes.

Legal wrappers, such as Panamanian foundations, provide DAOs with a formalized structure, enabling them to interact seamlessly with traditional legal and financial systems while mitigating risks for their members.

 

Understanding Panamanian Foundations

A Panamanian foundation is a legal entity that blends elements of a trust and a corporation. Unlike corporations, foundations do not have shareholders; instead, they are established for a specific purpose, with assets managed independently of the founder’s personal holdings. Foundations are overseen by a council, similar to a board of directors, and can hold assets, enter into agreements, and manage funds—making them an ideal legal wrapper for DAOs.

 

Regulatory Advantages of Panamanian Foundations for DAOs

  • Autonomy and Asset Protection - Panamanian foundations enjoy legal personality separate from their founders, ensuring that assets held by the foundation are shielded from external claims. This autonomy aligns perfectly with the decentralized ethos of DAOs.
  • Flexibility in Governance - Panamanian foundations allow for customized bylaws that define governance structures, asset management rules, and decision making processes.
  • Tax Neutrality - Income generated outside Panama by a Panamanian foundation is typically exempt from local taxation. This makes the structure attractive for global DAOs managing revenue streams from multiple jurisdictions.
  • Global Recognition - Panama’s robust legal framework for foundations is internationally recognized, providing DAOs with a credible and compliant legal presence.

 

5. Confidentiality - Panama’s legal framework ensures a high level of confidentiality, protecting the identities of founders and beneficiaries—a valuable feature for DAOs with diverse, privacy-conscious memberships.

Practical Cases: Panamanian Foundations as DAO Wrappers

  • 1. Token Issuance and Treasury Management - Many DAOs rely on token issuance for fundraising and governance. A Panamanian foundation can act as the legal issuer of these tokens, managing compliance with international financial regulations. Additionally, the foundation can serve as a custodian for the DAO’s treasury, ensuring secure and transparent asset management.
  • 2. Smart Contract Administration - Foundations can sign legal agreements on behalf of the DAO and serve as the registered entity responsible for executing smart contract obligations. This bridges the gap between decentralized digital operations and traditional legal requirements.
  • 3. Partnerships and Agreements - Panamanian foundations can facilitate partnerships with businesses, governments, and other organizations by acting as a legal intermediary. This enables DAOs to enter into legally binding contracts without compromising their decentralized nature.
  • 4. Liability Shielding - By wrapping the DAO within a foundation, individual members are protected from personal liability. This is particularly important for DAOs operating in highly regulated industries such as finance, healthcare, or real estate.

 

Setting Up a Panama Foundation

When compared to other jurisdictions like BVI, Cayman or Switzerland which are well-known destinations, establishing a Panama Foundation is quite reasonable including nominee directors, depending on the level of exposure and liability. We recommend clients to contact us for further information.

Setting up a Panamanian foundation for a DAO involves several key steps:

  • Drafting the Charter and Bylaws - These documents define the foundation’s purpose, governance structure, and operational rules. For a DAO, this includes specifying the relationship between the DAO’s smart contracts and the foundation’s council.
  • Appointing a Foundation Council - The council oversees the foundation’s activities. For DAOs, council members can be selected to represent the interests of the token holders or community members.
  • Registering the Foundation - Registration with Panamanian authorities formalizes the foundation’s legal status. This step also involves paying the required fees and complying with anti-money laundering (AML) regulations.
  • Integrating DAO Governance - The foundation’s governance structure can be programmed to align with the DAO’s smart contracts, ensuring seamless interaction between digital and traditional systems.

Since Panama still has no crypto regulatory framework, projects do not require legal opinions, which means that we can set up a Panama foundation in 1-2 weeks after we receive the complete KYC, the foundation will be ready for business.

 

Setting Up a Panama Triangle

A Panamanian special purpose crypto legal structure usually includes 3 entities.

1. Foundation - a Panama private foundation.

2. NFT or Token - a Panama corporation

3. Front-End - Another Panama corporation

We directly can set up the Foundation, Token and Front-End subsidiary companies in Panama or in jurisdictions such as BVI, Cayman, Nevis, Delaware and of course Panama. We provide full incorporation services in these jurisdictions.

 

Panamanian Foundations provide a Robust Framework:

Challenges and Considerations

While Panamanian foundations offer significant advantages, there are considerations to keep in mind:

  • Regulatory Compliance - Foundations must adhere to local and international laws, including AML and Know Your Customer (KYC) requirements.
  • Cost of Setup and Maintenance - Establishing and maintaining a foundation incurs fees, though these are generally competitive compared to similar structures in other jurisdictions.
  • Jurisdictional Conflicts - Depending on the DAO’s operations, conflicts may arise between the foundation’s governance and the laws of other countries.

 

Conclusion

Panamanian foundations present a compelling solution for DAOs seeking a legal wrapper to enhance operational efficiency, legal compliance, and member protection.

With their unique blend of flexibility, asset protection, and global recognition, these structures are poised to become the go-to choice for DAOs navigating the complexities of a hybrid digital-legal landscape. By leveraging Panamanian foundations, DAOs can focus on their core mission—whether that’s innovating in blockchain, managing decentralized communities, or driving social change—without being constrained by traditional legal hurdles.

 

How Pardini & Asociados can help you.

Pardini & Asociados has 40 plus years of experience specializing in Private Clients. We are the direct provider, and we offer bespoke services leveraging structures such as Companies and Foundations in multiple jurisdictions such as Panama, BVI, Nevis, Cayman, Belize, Seychelles and Delaware.

Pardini & Asociados is a leader in Private Client in Panama, including Wealth Protection, Fiduciary Services, Family Offices and Corporate Services. The firm acts as legal counsel on domestic and international tax matters, litigation, establish trusts, foundations or funds, family offices and carry out corporate and real estate deals. We provide them with tax planning, special purpose vehicles, banking, tax services and more.

When you combine P&A´s multidisciplinary Private Client and Cryptocurrency teams, P&A is uniquely positioned to advise clients on the legal and transactional issues involving multiple areas.

Our cryptocurrency and blockchain lawyers advise clients on issues related to:

  • Foundation or Company Set Up in the best jurisdictions. One of our services is setting up Corporations and Foundations in jurisdictions such as Panama, BVI, Delaware, Belize, Seychelles, St. Kitts & Nevis and Cayman Islands.
  • Set Up a DAO or NFT or Front-End issuance entity.
  • Legal Opinions.
  • Maintain Legal Structures providing full services, nominees, etc.
  • KYC & AML Compliance. Anti-money laundering compliance analysis and implementation.
  • Security and Utility tokens, non-fungible tokens (NFTs).
  • Decentralized finance (DeFi) networks, protocols and strategies.
  • Smart contracts and Token governance structures.
  • International Tax Structuring.
  • IP.

 

By Juan F. Pardini Jr.

Paris, France

 

For more information, please contact us.

 

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