Panama City's municipal government is legally required to accept payments in U.S. dollars, which, along with the USD pegged Balboa, is considered legal tender.v

Quotes that support claims

Mizrachi said previous administrations attempted to push through similar legislation but failed to overcome stipulations requiring the local government to accept funds denominated in US dollars. In a translated statement, the Panama City mayor said that the local government partnered with a bank that will immediately convert any digital assets received into US dollars, allowing the municipality to accept crypto without introducing new legislation.

Although Panama has its own currency, the balboa, the US dollar has more legal standing in a few different ways. It’s a legal tender; public institutions have to accept it, and the balboa is actually pegged to the dollar anyway.