The Philippines Moves to Regulate Virtual Currencies
According to a new circular from the central bank of the Philippines, BSP Circular 944, new rules and regulations have been approved about the oversight and governance of “Virtual Currency” exchanges, signed on February 6.
BSP Recognizes Advantages as well as Risks of Bitcoin
The Philippines has always ranked high when it comes to the amount of money remitted, to the point where a large part of their GDP depends on overseas workers sending home money to support their families. Bitcoin entrepreneurs seized this opportunity to capture an industry that had tremendous potential to be disrupted, and thus Bitcoin remittances and other bitcoin companies sprung up in the Philippines.
With volume from “just the top two players” growing from $2-$3 million per month to $5-$6 million per month compared to 2016, Bangko Sentral ng Pilipinas (BSP) decided it was time for a regulatory framework to be put in place. These regulations will ensure compliance with AML procedures, consumer protection, as well as financial stability.
BSP has been releasing advisories regarding Bitcoin since 2014 following the collapse of Tokyo-based Mt. Gox, but BSP Deputy Governor Nestor A. Espernilla Jr. said it was time for protocols regarding virtual currencies and business models handling virtual currencies to be set into place:
“You cannot ignore it anymore because it is a growing channel. In the overall scheme of things, it is not yet that big, but it has a potential to grow.”
While emphasizing positive aspects of virtual currencies, such as low-cost international value transfers and an avenue for greater financial inclusion, several risks were identified as a rationale for regulation:
“These benefits, however, should be considered along with the corresponding risks in virtual currencies considering the higher degree of anonymity involved, the velocity of transactions, volatility of prices and global accessibility.”
The regulations and guidelines are expected to take effect by the end of February. Everything from transactions exceeding P500,000 (approximately $10,000) to be done only via check or direct deposit, to technology risk management rulings that businesses that are handling virtual currencies must adhere to will soon become in effect.
At some point in the future, the companies would have to register as a money transfer business. Failure to register with the BSP would lead to no bank dealing with said company, Espenilla states.
A Positive Step for the Bitcoin Ecosystem in the Philippines?
“The circular is a positive step for Bitcoin firms and users, for sure. It provides a framework wherein Bitcoin companies such as ours to operate legally and in compliance with rules and regulations set forth by the BSP. I believe it is crucial for the BSP to keep such an open line of communication with companies like ours as the industry and the technology further grows.”
All in all, the wording in the circular suggests a neutral stance towards bitcoin and other cryptocurrencies. BSP sees the ability of bitcoin and other cryptocurrencies to expedite financial services, primarily payments, and remittances, but is looking to ensure all traffic is AML compliance and risks are mitigated.