Panama’s Private Investment Funds as Vehicles for Crypto and Asset Management

Panama has historically positioned itself as a jurisdiction that prioritizes private autonomy and contractual freedom within a civil law framework. In recent years, this approach has made the country particularly attractive for structuring investment vehicles holding alternative assets, including crypto-assets. One such vehicle is the Private Investment Funds, which—similar to the Private Interest Foundation—offers a flexible legal structure for asset management while remaining subject to clearly defined regulatory thresholds.

This article examines the use of Panamanian PIFs for cryptocurrency investment, focusing on their legal basis, regulatory treatment, and practical considerations under current Panamanian law.

Private Investment Funds and Digital Assets

Private Investment Funds in Panama were originally conceived as collective investment vehicles for traditional asset classes. However, their legal design has allowed them to evolve in parallel with financial innovation. In the context of digital assets, Private Interest Foundations have increasingly been used as legal wrappers to hold and manage crypto-assets in a structured and legally recognizable manner.

Importantly, Panamanian law does not require specific statutory recognition of crypto- assets for them to be held within a PIF. Under Article 18 of the Panamanian Constitution, activities are permitted unless expressly prohibited by law. Consistent with this principle, crypto-assets are generally treated as movable property under the Civil Code, allowing them to be included in a fund’s patrimony alongside other asset classes such as securities, real estate, or commodities.

Regulatory Framework Applicable to PIFs

The degree of regulatory oversight applicable to a Private Investment Funds depends primarily on the number of investors and the manner in which participation interests are offered. This distinction is central when structuring crypto-focused funds.

Funds with Up to 20 investors

Under Agreement No. 5-2004, private investment funds with 20 or fewer beneficial owners, provided that they are related parties or otherwise meet the statutory criteria, are exempt from registration and notification requirements before the Superintendencia del Mercado de Valores (SMV). As a result, these funds operate entirely within the private sphere of contract law. They are not subject to ongoing supervision by the SMV, nor are they required to appoint a licensed investment manager or independent custodian. From a crypto-asset perspective, this allows the fund to maintain direct control over digital wallets, subject to internal governance rules and fiduciary duties established in the fund documentation.

Funds with Up to 50 investors (Private Offering )

with the SMV but remains exempt from full public registration and ongoing supervision applicable to public mutual funds. This structure is frequently used in practice for more complex arrangements, including DAO-related structures, where participation is restricted to qualified investors meeting minimum investment thresholds. While such funds are subject to additional formalities, such as annual audits, they retain a high degree of contractual flexibility and operational autonomy.

Regulatory Position on Crypto-Assets

The SMV has historically indicated, through interpretative criteria and administrative practice, that cryptocurrencies do not qualify as securities under current Panamanian law and therefore fall outside its direct regulatory competence. This position creates a legally permissive environment, albeit one characterized by regulatory neutrality rather than affirmative regulation. In this context, disputes involving crypto-assets held by a PIF are generally treated as civil or contractual matters, subject to ordinary judicial remedies rather than sector-specific financial supervision.

Risk Considerations and Corporate Governance

While PIFs offer structural advantages, their effectiveness depends heavily on proper governance and operational discipline. One of the principal risks is the potential recharacterization of the fund as a sham entity if corporate formalities are disregarded. Common risk factors include:

• Commingling personal and fund assets
• Absence of clear governance rules over wallet control
• Failure to document investment decisions or fund resolutions

Panamanian case law has consistently shown that entities lacking genuine legal separation may be exposed to creditor actions or veil-piercing claims. Accordingly, crypto-focused Private Interest Foundations should implement robust internal controls and clearly delineate ownership and decision-making authority over digital assets.

Conclusion

Private Investment Funds in Panama provide a legally sound and flexible framework for holding and managing crypto-assets under current law. By remaining within the statutory thresholds applicable to private offerings, investors may benefit from reduced regulatory intervention while operating within a recognized legal structure.

As with any asset-holding vehicle, the effectiveness of a Private Interest Foundations depends on compliance with its governing documents, respect for corporate separateness, and adherence to general principles of civil and commercial law. When properly structured and managed, the Panamanian PIF can serve as a practical tool for crypto-asset management in a jurisdiction characterized by legal certainty and contractual freedom.

What can We DO for You

Pardini & Asociados multidisciplinary cryptocurrency and blockchain team is uniquely positioned to advise on the legal and transactional issues involving cryptocurrency and digital tokens, as well as the blockchain.

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 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.

Ready to launch your tokenized project in Panama? Visit www.pardinilaw.com to learn more about our Blockchain & Crypto Practice or contact our team today for a tailored consultation.

By Juan F. Pardini Jr.

Paris, France