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Hi, This is Qadir A.K, Crypto lover, and Research Columnist.
Welcome to the next chapter of my writing series, ‘The Cryptocurrency Breakthrough 2020 – Synopsis 17’ – Cryptocurrency Regulations in Philippines.
The Republic of the Philippines has emerged as one of the most dynamic Asia-Pacific economies in the world with impressive economic fundamentals. The Crypto market is growing despite many ups and downs due to increasing demand and lenience among regulators.
Government’s Approach to Cryptocurrencies
The Philippines is becoming increasingly crypto-friendly due to a positive approach from the regulatory bodies and the Central bank. The Central Bank is registering more and more exchanges and also engaged in various crypto projects. On the other hand, regulatory bodies are actively finalizing crypto guidelines.
Cryptocurrencies are being regulated formally after the issuance of Circular No.944 dated Feb 07, 2017, by the Central bank, Bangko Sentral ng Pilipinas (BSP).
Governor of BSP, Nestor A. Espenilla Jr at an annual convention acknowledged that virtual currencies can revolutionize financial services delivery, particularly for payments and remittance.
Explaining the central bank’s reviews on the cryptocurrencies he said,
“We have adopted a regulatory approach to privately-issued cryptocurrency that is balanced, open and flexible. This is to allow the market to promote financial innovation and for the industry to take advantage of all its benefits and efficiencies – with prudence”
He further stated that cryptocurrencies are neither good nor bad, they are neutral. And the central bank would allow its development including the necessary regulatory framework to protect the consumer’s interest and maintain financial stability.
Regulations on the Cryptocurrencies
The BSP- central bank, Securities and Exchange Commission (SEC) and Anti-Money Laundering Council (AMLC) are the regulatory bodies responsible for the crypto regulations.
Bangko Sentral ng Pilipinas (BSP)
As per the circular issued in Feb 2017 regarding virtual currencies, the virtual currency exchanges that offer conversion from fiat currency to cryptocurrency and vice versa, need to register with the central bank.
The exchanges with payout value more than php500,000 have to pay via cheque or deposit funds directly in the account. In the case of cryptocurrency ATM’s, BSP considers them as exchanges and the same rule applies to the ATM’s too.
The Central Bank would have monitor internal controls, technology risk management, consumer protection, wallet management and AML practices.
Anti-Money Laundering Council(AMLC)
The AMLC has already incorporated the FATF standards to prevent money laundering and terror financing, implementing rules and regulations for the Anti-Money Laundering Act. The Act states principles that financial institutions should consider to manage and mitigate money laundering risks associated with cryptocurrencies.
Securities and Exchange Commission (SEC)
The SEC has published its Draft Rules for Digital Asset Exchange, where-in the Digital Assets Exchanges are regulated as Self-Regulatory Organization (SRO) under the provisions of Securities Regulation Code (SRC).
The proposed rules include the capital requirements, the annual limitation on purchase of digital assets, and prohibitions on insider trading and market manipulation.
The SEC issues public warnings related to unregistered cryptocurrency exchanges and cryptocurrency-related investment scams.
The Regulatory Framework
Crypto-friendly Philippines has a set of comprehensive regulations termed as Digital Asset Token Offering (DATO) regulations. The guidelines were formed and approved by the government-owned Cagayan Economic Zone Authority (CEZA) to provide secure markets for the customers.
The new rules cover the acquisition of all types of crypto-assets including security and utility tokens. As per the regulatory framework, the investments in the digital currencies are divided into three tiers that represent the range of the investments.
- First-tier includes investments and assets, not more than $5 million.
- The second tier would range from $6 – $10 million
- The third tier would be investments above $10 million.
Taxation and Mining
Taxes on the Cryptocurrencies
The Bureau of Internal Revenue (BIR) has not yet issued its guidelines on the tax treatments on cryptocurrency transactions despite the fact that the cryptocurrency is gaining huge interest in the Philippines market.
BIR and SEC treat cryptocurrencies as ‘Securities’ which may be subjected to taxes under National Internal Revenue System (NIRS) where-in any income of an individual or corporation, in whatever form, sourced from the Philippines, is taxable.
Mining of Cryptocurrencies
Cryptocurrency mining is very popular in the Philippines and cloud mining is operated as one of the businesses in the country. The SEC has enforced securities regulations on the cloud mining operations considering these types of activities as ‘Securities’.
The cloud mining operators need to register with the SEC to start its operation in the country. The SEC has issued an advisory and warned the cloud mining participants.
On the other hand, the biggest bank in the country, Union Bank showcased Bitcoin mining equipment at a business conference.
Series of Events
15-04-2020:- The Philippines SEC exposes cryptocurrency scam and warned the investors against a scheme dubbed ‘The Billion Coin’, and notified that they could face a 21-year prison for acting as salesman, brokers, dealers or agents.
21-01-2020:- The IMF provides technical assistance regarding crypto assets to the Philippines in order to become an important crypto player.
11-06-2019:– The Central bank warns about the growing cryptocurrency use in the country.
07-08-2018:- The central bank of Philippines is considering the possibility of issuing the country’s own digital currency and the impact on the monetary system.
02-08-2020:- The Philippines SEC published draft rules governing token sales and digital currencies. The draft rules provide a road map for the regulations for the token coins issued in ICO.
10-07-2018:- CEZA issued a provisional license to the first crypto exchange which is based in Hong-Kong. However, the company will be granted with permanent license after they comply with the SEC regulations.
25-04-2018:- CEZA issued a license to 10 crypto exchanges companies in the country to mark their legal entry into the economic zone.
06-02-2017:- The central bank regulated cryptocurrencies as ‘legal tenders’ by issuing a circular on virtual currency exchanges.
06-03-2014:- The Central Bank issues a press release describing virtual currencies and the risks of buying, holding or trading virtual currencies.
The Republic of the Philippines provides a friendly environment for crypto investors and traders with the required regulations and laws. The country is on the verge of becoming a Cryptocurrency hub of Asia in the coming future to ease the dependability on China.
Hence the upcoming days would be really interesting to watch the efforts of the country to build a highly crypto-friendly environment for the crypto activities.