5 Facts About What Currency Does Panama Use

When planning a trip or looking into offshore banking, one question often pops up: what currency does Panama use? While many assume every Latin American country uses its own version of the peso, Panama is a fascinating exception. Its unique approach to money, trade, and international business makes it one of the most dollarised economies in the world. 

Below are five essential facts to answer what currency does Panama use and why it matters.

What Currency Does Panama Use? 5 Key Facts

1. Panama Uses the US Dollar as Legal Tender

The most surprising answer to what currency does Panama use is this: the US dollar. Officially known as the Balboa in Panama, the local currency is pegged 1:1 to the US dollar. But in everyday use, it's the US dollar that dominates. Since 1904, the country has used American banknotes for all its cash transactions, from buying groceries to signing multimillion-dollar real estate deals.

So, if you're wondering what currency does Panama use at the airport, hotel, or restaurant, you'll find US dollars in circulation—not pesos, not euros, and not bitcoin (at least not officially). It's an arrangement that provides financial stability, especially in a region where currency volatility is often a concern.

2. The Panamanian Balboa Exists Only as Coins

While the US dollar handles the heavy lifting, Panama does have its own national currency: the Balboa. This brings an added layer to the question, what currency does Panama use?

The Balboa exists only in coin form—no banknotes. You'll find coins in denominations like 1, 5, 10, 25, and 50 centésimos (similar to cents). These coins are nearly identical in size and value to US coins and are used interchangeably across the country. A 25-cent Balboa coin can be used just like a US quarter.

There is technically a 1 Balboa coin too, and it's roughly equivalent to a US dollar. But again, you won't find Balboa notes. So when you ask what currency does Panama use, remember: dollars in the wallet, Balboas in your pocket change.

3. Panama Has No Central Bank and No Control Over Monetary Policy

A unique feature of Panama's economy is its lack of a central bank. Since it uses the US dollar, the country cannot print its own money or control interest rates. Instead, it relies entirely on US monetary policy. This arrangement plays a major role in understanding what currency does Panama use and how the local economy functions.

This dollarisation means Panama enjoys a degree of financial stability that its neighbours often lack. Inflation is typically low, and foreign investors feel more confident bringing money into a dollarised system. On the flip side, Panama has no ability to devalue its currency in times of crisis—a trade-off worth noting when asking what currency does Panama use and how it impacts national sovereignty.

4. The Dual-Currency System Simplifies Trade and Tourism

Panama's currency system makes it an attractive destination for both international business and tourists. Knowing what currency does Panama use can save travellers the hassle of currency exchange. Visitors from the United States, in particular, can use their cash without converting anything.

This dual-currency setup also simplifies cross-border transactions. Panama acts as a financial hub in the Americas, and the use of the US dollar makes it easier to conduct international banking, shipping, and logistics. If you're wondering what currency does Panama use in large-scale business deals or import/export operations, the answer is still the US dollar.

Even international fintech firms often choose Panama as a regional base, precisely because of its currency stability. While other countries battle inflation or currency controls, Panama's use of the dollar brings predictability.

5. Crypto and Digital Payments Are Growing

As digital wallets, fintech platforms, and cryptocurrencies gain popularity, you might ask if the answer to what currency does Panama use is evolving. The country has taken steps toward recognising and even regulating cryptocurrencies like bitcoin and Ethereum. In 2022, a law was proposed to allow Panamanians to pay taxes and conduct private transactions using crypto, though it has not yet been enacted.

Despite these developments, crypto is not legal tender. It has not replaced the US dollar, nor the Balboa coins in circulation. So when it comes to what currency does Panama use in everyday transactions, digital payments are more of a supplement than a substitute. Most Panamanians still rely on traditional bank accounts and card payments backed by US dollars.

That said, Panama is forward-thinking. The country's interest in digital innovation suggests the financial landscape may broaden in future—but not at the expense of its core reliance on the US dollar.

Conclusion

Whether you're a tourist, investor, or international entrepreneur, understanding what currency does Panama use can help you avoid confusion and make better decisions. The dollar-based economy removes exchange rate risks, and the lack of local banknotes simplifies payments.

It also sets Panama apart from neighbouring countries. While others face volatile currency markets or inflation, Panama enjoys dollar-driven predictability. This insight is crucial whether you're budgeting your holiday or planning offshore investments.

Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.