Place a wire rack inside a rimmed cookie sheet and spray both with cooking spray. Preheat your oven to 400°.
Cut chicken breasts into strips. Pulse the coconut in a food processor or blender to break it into smaller pieces.
In a shallow dish, mix together the flour, salt, pepper, garlic powder, and smoked paprika. In a second container, whisk the egg and water. In a third container, stir together the Panko crumbs, coconut, and salt.
Coat each piece of chicken with the flour mixture, then dip in the egg mixture. Finally, dip into the coconut mixture and press the crumbs firmly onto the chicken. Place on a plate and repeat with all the pieces of chicken.
If desired, heat half of the coconut oil in a large skillet over medium-high heat. Brown both sides of half of the chicken pieces for about 2 minutes, just until browned. Set aside. Repeat with the remaining oil and chicken. (You can skip this step and just place chicken on the prepared baking sheet.)
Bake the chicken at 400° until the internal temperature reaches 165°. If you browned it first, it will be done in 10-12 minutes. If you skip that step, cook it for about 15 minutes.