Crypto Regulations in Philippines
The Philippines has a high level of awareness of crypto as 54% of Filipinos express their interest in investing in means of payment for online purchases. The country is among the nations with the largest active crypto community about 2 million people are aware of the cryptocurrencies and the maximum among them have owned.
The Republic of the Philippines provides a friendly environment for crypto investors and traders with the required regulations and laws. The Philippines is becoming increasingly crypto-friendly due to a positive approach from the regulatory bodies and the Central bank.
Source: Coinpedia
The Philippines is not expected to accord a legal tender status to cryptocurrencies even if the country may support policies on its use moving forward.
In its latest analysis, UK- based Economist Intelligence UNIT(Eu) said the Philippines displays the most benign attitude toward cryptocurrency but is said the Government is expected to eventually curb crypto deals over the next five years as more awareness of its risks is shown.
(Source: Philstar Global: Cryptocurrency unlikely to become legal tender in the Philippines
Digital Assets Regulations
As a digital value or asset, Virtual Currencies are easy to use as payment for goods and services that are offered online. This can support the growing e-commerce industry in the Philippines. It can also support the use of social media, mobile technologies, and other innovative platforms as delivery channels for financial services.
BSP Circular No. 1008 regulates Virtual Asset Service Providers (“VASP”) which refer to entities that offer services or engage in activities that provide facility for the transfer or exchange of virtual assets which involve the conduct of one or more of the following activities:7
- The exchange between virtual assets and fiat currencies.
- Exchange between one or more forms of virtual assets.
- Transfer of virtual assets; and
- Safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets.
Source: Lexology
Virtual Assets are a type of digital unit that can be digitally traded, or transferred, and can be used for payment or investment purposes.6 Further, they can be further defined as Property, proceeds, funds, funds and other assets, and other corresponding value. It further includes digital units of exchange that have:
- Centralized repository or administrator
- Decentralized and have no centralized repository or administrator; or
- Created or obtained by computing or manufacturing effort. 7
Unlike e-Money, the value of VA’s is not determined on its face.8 The value exchanged for fiat currency can either go higher or lower depending on the value created within the community of VA users.9 In other words, the value of the VA would largely depend on the price the market of users would be willing to pay. A prime example of this is bitcoin. Despite no underlying asset, an investment of USD 100 in 2010 would amount to USD $ 9.2 million after only ten years.
Source: Mondaq
The Monetary Board, in its Resolution No. 78 dated 2L January 2O2L, approved the following rules and regulations governing the operations of Virtual Asset Service Providers (VASPs) in the Philippines, which shall amend in its entirety Section 902-N of the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI).
- Guidelines for Virtual Asset Service Providers (VASP)
Source: BSP
- Section 1. Section 902-N on Virtual Currency Exchanges shall be replaced by Virtual Asset Service Providers (VASP)
- Section 2. Appendices in the MORNBFI that made reference to “Virtual Currency Exchanges”
- Section 3. Transitory provisions
- Section 4. Effectivity Clause.
The Philippine Central Bank, the Bangko Sentral ng Pilipinas (BSP) requires VASPs to register.
The BSP has developed an AML framework in line with FATG guidelines. The BSP licensing requirements include exchanges of virtual assets and fiat currency. All transactions are treated as cross-border wire transfers and crypto service providers are expected to comply with relevant BSP rules. Additionally, BSP licensed firms must comply with rules for money service businesses such as liquidity risk management, IT risk management, and consumer protection.
Source: Thomson Reuters
Taxation of Digital Assets
Taxes on digital assets and crypto taking shape soon in the Philippines. The patchwork .of new tax rules aiming at collecting revenue from the growing digital asset market creates new risks and obligations for investors and coders. Global investments in digital assets have increased significantly in the past 13 years.
The Bureau of Internal Revenue (BIR) and Department of Finance (DOF) have released statements on cryptocurrencies, the Philippines’ #1 online tax app “Taxumo” allows an easy and seamless tax filing online without the involvement of a broker or an accountant. Any gain involving mining is taxable only when the virtual currency is converted to fiat currency. The gain from crypto is considered under income tax after realization and hence income tax is paid every quarter rather than paying annually.
The cryptocurrency triggered to be treated as stocks is considered as capital gains tax which will be taxed as other securities and stocks in the country. VAT the tax applied on goods and services is required to be paid only if the earnings exceed Php 3 million pesos and the lesser will be considered under percentage tax.
Source: Cryptoziyan
The Philippines uses a self-assessment system in collecting taxes, whereby taxpayers themselves determine which income will be reported in the tax returns and calculate their own tax liabilities based on such a report. After the returns are filed, the BIR shall examine and check whether the correct amount of taxes were paid by taxpayers through BIR audits or assessments.
Considering the foregoing, one challenge for tax authorities when it comes to digital transactions, including cryptocurrency transactions, is the difficulty of tracking the income arising from such undertakings. Currently, for tax purposes, there are no reportorial requirements for those engaging in cryptocurrency transactions. Hence, the BIR may be blind to the income being earned on those transactions. In other countries, for instance, individual taxpayers have to indicate in their tax returns whether they received, sold, spent, exchanged, or acquired any financial interest in any virtual currency during the year or not.
Source: Bworld Online
In recognition of the recent advancements in the financial market, the Commission formulated
the rules to govern Digital Asset Exchange in accordance with the Securities Regulation Code (SRC), its Implementing Rules and Regulations and international practice and standards.
The Securities and Exchange Commission is preparing rules governing digital asset offerings (DAO) and digital asset exchanges (DAX) to provide the investing public with more options, as well as protect them from the misuse of such emerging assets.
During a virtual press briefing, SEC Associate Commissioner Kelvin Lester K. Lee said the rules for both DAO and DAX are undergoing revisions and the commission has asked the public for comments that will be considered in the drafting of the new rules.
Source: MB
The Philippines has embraced cryptocurrency as data shows the country has the third-highest uptake of crypto globally…
The Philippines is one of the world’s fastest adopters of cryptocurrency, new reports show. According to data, the pandemic has fueled the trend, with Filipinos releasing the value of crypto as an investment and income-generating currency.
A rise in crypto-friendly technology in the country has also facilitated its uptake, which means the Philippines is now on a par with Vietnam and Nigeria.
Reports by consensus experts from the Bangko Sentral ng Pilipinas (BSP) earlier this month show that gaming rewards, BTC, ATM networks and rural banking integration are ‘reliable early indicators for the upsurge that makes crypto growth in the Philippines the world’s third-fastest growing sector.
Source: Fintech Magazine
The public is advised to follow the tips in order to avoid the risk of Bitcoin Scam, to wit:
- Use two-factor authentication every time;
- Always remember, that bitcoins do not work like credit cards. If you lose money fraudulently, nobody can send a refund;
- Do not keep your savings in a web wallet even though it is convenient;
- Never engage in any financial transaction, bitcoin or otherwise, via direct message on social networks.
Source: acg.pnp.gov.ph
Astrazion Group:
Astrazion Group has been under the regulator’s radar since earlier this year, culminating in a cease and desist order against the firm.
The Securities and Exchange Commission (SEC) issued the order against Astrazion Global Holdings Philippines, Astrazion International, and Astrazion Noble Task Community Foundation, all collectively known as Astrazion Group. It also issued a ruling against the orchestrators of the scheme.
THE Securities and Exchange Commission (SEC) has directed Astrazion entities to immediately cease and desist from engaging in the unlawful and unauthorized solicitation, offer, and sale of securities, calling the scheme “fraudulent.”
In its order, which was filed specifically by the Enforcement and Investor Protection Department, the watchdog ordered the company to stop engaging in “unlawful/unauthorized solicitation, offer and/or sale of securities until it has filed the requisite registration statement and secured the necessary approval from the SEC.”
Based on the SEC’s investigation, Astrazion Global and Astrazion Foundation are duly registered corporations with the commission. However, both firms have never secured a secondary license as an issuer of securities or broker-dealers.
Source: Bworld Online
The Securities and Exchange Commission (SEC) has taken down another investment scam promising fast and guaranteed returns from cryptocurrencies in an entrapment operation that resulted in the arrest of 19 individuals.
In a joint operation on June 11, the combined forces of the SEC Enforcement and Investor Protection Department (EIPD) and Philippine National Police Anti-Cybercrime Group (PNP-ACG) arrested the officers of Dicentra while in the act of soliciting investments from the public without the requisite license during a seminar or business presentation in a hotel in Quezon City.
Dicentra was found to be offering several investment packages online, with an initial membership fee of 99.95 Tether (USDT).
Tether is a stable cryptocurrency hosted on the Ethereum and Bitcoin blockchains, which was originally designed to always be worth US$1, maintaining US$1 in reserves for each tether issued.
Investors are also required to pay 34.95 USDT per month, or 349.95 USDT per year, to access reward opportunities on Decentra’s platform.
Members are promised returns of up to 120 percent of their initial investment depending on the package they avail of and the number of recruits they invite into the system.
Overall, a member could supposedly earn a profit of US$100,000, or PHP5 million per day, on an investment of US$50,000.
In an advisory dated June 13, the EIPD said Dicentra was not registered with the commission as a corporation, partnership, or one-person corporation.
Accordingly, it did not have the secondary license for the solicitation of investments, as required under the SRC.
The EIPD also found that Dicentra was headed by former members of Crowd1 Asia Pacific, Inc., whose certificate of incorporation was revoked by the SEC on Sept. 9, 2020, over its illegal solicitation of investments from the public.
Source: pna.gov.ph
The Bangko Sentral ng Pilipinas (BSP) is the central bank of the national government. The BSP has decided to take a proactive approach to FinTech players and actively engage them rather than regulate from a strict vantage point.
According to BSP Governor Benjamin Diokno, Fintech players have transformed the delivery of financial services by offering “far more convenient” ways of executing financial transactions. They have empowered the unbanked and underbanked to participate in the economy through easier access to financial services. Governor Diokno has pointed out blockchain and virtual currency technology as particularly promising.
Governor Diokno outlined the three (3) key principles to regulating FinTechs2:
- Regulations that are risk-based, proportionate, and fair;
- maintain an active collaboration with multiple stakeholders; and
- ensure that innovations must work for the benefit of customers, particularly the vulnerable ones.
With this in mind, the BSP openly engages with stakeholders through a flexible “test and learn” environment or the regulatory sandbox that allows the regulators to fully understand emerging business models while at the same time assessing attendant risks. This has resulted in one of the most advanced regulations in Southeast Asia.
Source: Mondaq
