In the world of digital and decentralized finance, cryptocurrencies are making waves. Understanding the rules that guide these decentralized assets is like having a roadmap in this ever-changing landscape. To make sense of this exciting but ever-changing landscape, we need to dive into the rules that keep things in check of the decentralized finance system. Now, let’s get closer to home; the cryptocurrency regulations in the Philippines. In this article, we will guide you through understanding the regulations of cryptocurrency in the Philippines, bridging the gap between decentralized and centralized finance.
What is Cryptocurrency?
Cryptocurrency is a digital or virtual form of currency that uses cryptography for security. Unlike traditional currencies issued by governments (fiat currencies, or the Philippines Peso), cryptocurrencies operate on decentralized networks based on blockchain technology. Blockchain is a distributed ledger that records all transactions across a network of computers.
People can buy, sell, and trade cryptocurrencies through online platforms called exchanges. The decentralized nature of cryptocurrencies makes them resistant to government interference and manipulation.
Why Regulate Cryptocurrency in the Philippines?
In the Philippines, the use of cryptocurrency is legally accepted, but it doesn’t hold the status of legal tender. In other words, while it’s permissible to use and trade cryptocurrencies, they aren’t officially recognized as a form of currency that must be accepted for transactions. Yet, these virtual currencies can be used as a way of purchasing or selling crypto assets which can be translated into Philippine Peso.
- Money laundering
While cryptocurrency transactions offer a degree of anonymity, regulatory measures have been implemented to curb illicit financial activities. The Anti-Money Laundering Act (AMLA) and the Anti-Money Laundering Council (AMLC) of the Philippines play pivotal roles in monitoring and regulating financial transactions, including those involving cryptocurrencies.
- Terrorist Funding
Terrorist financing remains a global concern, and the Philippines, being vigilant in its efforts against terrorism, extends this concern to the realm of cryptocurrency. Regulatory bodies, including the AMLC, actively work to prevent the illicit use of digital assets for financing terrorist activities. The country’s legal framework places obligations on financial institutions and virtual asset service providers to implement robust anti-terrorism financing measures.
What are Cryptocurrency Laws and Regulations in the Philippines?
The Banko Sentral ng Pilipinas (BSP) and the Securities and Exchange Commission (SEC) has been releasing guidelines, rules and regulations since early February 2017. Here are some of the published and approved guidelines and cryptocurrency regulations in the Philippines.
What are the Cryptocurrency Regulations by The BSP?
In early February 2017, The Bangko Sentral ng Pilipinas (“BSP”) issued Circular No. 944, Series of 2017 or called as “Guidelines for Virtual Currency Exchanges” (the “Circular”). Virtual Currency (VC), refers to any type of digital currency that can be used as a medium of exchange. This regulation promotes and complies with the Anti-Money Laundering act that implements and applies to Virtual Currencies (VC).
In 2021, the Bank Sentral ng Pilipinas (BSP) released regulatory guidelines for Virtual Asset Service Providers (VASP), which obliges and requires VASPs to obtain a license from BSP before starting operations in the Philippines.
As of December 4 2023, there are 17 VASPs registered in the Philippines, and these are:
- ABA Global Philippines, Inc. under the trade name/s of COEX STAR
- Betur Inc. (doing business under the name and style of COINS.PH)
- Bloomsolutions, Inc.
- Direct Agent 5 (Also doing business under the name and style of SurgePay mobile app)
- Moneybees Forex Corp.
- Maya Philippines, Inc.
- Philippine Digital Asset Exchange (PDAX)
- TopJuan Technologies Corporation
- XenRemit, Inc
- Zybi Tech, Inc. (Doing Business under the name and style of Juan Cash)
Inactive / Not Operational – NON Bank VASPs - Appsolutely, Inc.
- Atomtrans Tech Corp.
- Etranss Remittance International Corp.
- i-Remit, Inc.
- Philbit Money Changer and Remittance Services, Inc.
- WIBS PHP, Inc.
Inactive / Not Operational – Bank VASPs - Union Bank of the Philippines, Inc
What are the Cryptocurrency Regulations by the SEC
In 2018, the SEC of the Philippines issued an advisory regarding ICOs and cryptocurrency investments. The advisory served as a cautionary note to investors, emphasizing the associated risks and potential vulnerabilities in the rapidly evolving cryptocurrency market. One key aspect highlighted was the need for companies engaging in ICOs to register with the SEC and comply with existing securities regulations. This step aimed to provide a level of investor protection and ensure that these offerings adhere to established legal standards.
In December 2022, the SEC released a cautionary statement to the public about using unregistered and unregulated cryptocurrency exchanges in the Philippines. These issued warnings served to protect consumers from potential risks associated with unregulated platforms, including fraud, security vulnerabilities, and non-compliance with financial regulations.
On November 28, 2023, the Philippine’s Security and Exchange Commission plans to block access to world’s largest crypto exchange, Binance. Starting November 29, 2023 the SEC will give Filipino users months to pull out investments from Binance.
Taxes on Cryptocurrency in the Philippines
The Philippine government has recently introduced a capital gains tax ranging up to 15 percent on transactions involving cryptocurrencies. This move aims to regulate and levy taxes on the expanding digital asset market. The imposed tax is applicable to profits generated from selling or exchanging cryptocurrencies, as well as transactions involving the use of cryptocurrencies for purchases. This comes with the compliance and obligation of Filipino citizens who trade, buy, or sell cryptocurrencies to report their capital gains during the annual tax filings.
Invest in Cryptocurrency at Your Own Risk
Considering investing in cryptocurrency in the Philippines? Here are some key factors to consider.
- Volatility
Cryptocurrencies are renowned for their rapid and unpredictable price swings. The market can experience significant fluctuations in a short period, leading to both substantial gains and losses. Before diving in, be prepared for the inherent volatility and ensure your risk tolerance aligns with the dynamic nature of the cryptocurrency market.
- Only Invest Money You Can Lose
The cryptocurrency market is dynamic and can be unpredictable. Only invest funds that you can afford to lose, recognizing the speculative nature of the market and the potential for both gains and losses. This approach ensures that your overall financial well-being is not jeopardized by the inherent risks associated with cryptocurrency investments.
- Rules and Regulations
The regulatory landscape for cryptocurrencies is continually evolving. Different countries have diverse approaches, and regulatory uncertainties persist. Keep a close eye on the legal frameworks governing cryptocurrency investments in your jurisdiction. Stay informed about regulatory developments to navigate potential changes that might impact your investment strategy.
- Scams and Fraud
The decentralized and pseudonymous nature of cryptocurrencies can make them susceptible to scams and fraudulent schemes. Exercise utmost caution when dealing with unfamiliar platforms, tokens, or investment opportunities. Conduct thorough research, verify the legitimacy of projects, and beware of unsolicited offers promising unrealistic returns. Protect your investments by prioritizing security and due diligence.
Benefits of Regulating Cryptocurrency in the Philippines
Regulating cryptocurrency in the Philippines can offer several benefits, contributing to the stability and growth of the digital asset market while ensuring consumer protection and financial integrity.
- Investor Protection
Regulation can establish guidelines and standards that help protect investors from fraudulent activities, scams, and other illicit practices in the decentralized space. Clear rules can enhance transparency, reducing the likelihood of investors falling victim to unscrupulous schemes.
- Market Integrity
Regulatory oversight promotes fair and transparent practices within the cryptocurrency market. This can deter market manipulation, insider trading, and other activities that could compromise the integrity of the digital asset space.
- Legal Clarity
Regulation provides legal clarity for businesses and individuals involved in cryptocurrency transactions. Well-defined rules can help businesses understand their obligations, reducing uncertainty and encouraging the growth of legitimate enterprises in the cryptocurrency ecosystem.
- Taxation Revenue
Regulating cryptocurrency transactions allows governments to implement taxation measures, generating revenue that can contribute to public services and infrastructure development. The imposition of taxes on cryptocurrency transactions can be a sustainable way to support national finances.
- Financial Inclusion
Clear regulatory frameworks can foster the integration of cryptocurrencies into the broader financial system. This can potentially enhance financial inclusion by providing individuals who may not have access to traditional banking services with avenues for participation in the digital economy.
Conclusion
The importance of regulating cryptocurrencies cannot be overstated as it plays a pivotal role in fostering a secure and stable environment for investors and the broader financial ecosystem. Regulatory frameworks provide a necessary foundation for mitigating risks associated with the inherent volatility of cryptocurrencies, protecting against potential scams, and ensuring compliance with legal standards.
Beyond risk mitigation, effective regulations offer numerous benefits, including increased investor confidence, clarity for businesses operating in the crypto space, and the potential for sustained market growth.
Striking a balance between innovation and protection, regulations contribute to the legitimacy and long-term sustainability of the cryptocurrency market, offering a framework that encourages responsible participation while safeguarding against potential pitfalls.
