Virtual assets like cryptocurrency are becoming more prominent in the Philippines. Presently, cryptocurrency serves as a low-cost way of transferring money, a high-potential investment vehicle, and a borderless store of wealth. Additionally, people think of it as the currency of the future, so they race to buy it now before it becomes more valuable.
As of 2021, over 4,300,000 individuals own cryptocurrency in the country. With the global crypto surge and the pandemic, more people are seeing it as a secure and convenient alternative to fiat currency.
But with the increasing trend and regard for virtual assets also comes with the growing risks of crypto platforms becoming channels to money laundering, scams, and other cyber attacks. Fortunately, regulatory agencies like Bangko Sentral ng Pilipinas (BSP) act proactively to provide awareness and issue guidance on the use of cryptocurrency Philippines.
BSP’s regulatory approach was to supervise the Virtual Asset Service Providers (VASPs) where transactions and exchanges between virtual assets and fiat currencies happen. The BSP Circular No. 1108 (2021) aims to safeguard the integrity and stability of the financial system now that cryptocurrencies are in circulation. With this policy, BSP recognizes the advantages of virtual assets and encourages their use while protecting the economy, service providers, and users from illegal activities.
Accordingly, VASPs should register with the BSP. They must also follow the guideline and implement internal controls, technology risk management, consumer protection, wallet management, know-your-customer (KYC), and anti-money laundering practices. Reportorial requirements for these entities include audited financial statements, list of official offices and websites, and an account of the volume and value of virtual assets transactions.
Moreover, the guidance clarified that virtual assets are not backed by a central bank and are therefore not legal tender. This means that although users can use it to trade and as a conduit for certain financial transactions like remittances and payments, it is not a recognized legal instrument for payment of debts, taxes, and other financial commitments.
The primary concern of BSP in the regulation is to ensure that the virtual asset systems will not be used to facilitate illegal activities such as terrorist financing, fraud, smuggling, and piracy. Secondarily, it aims to increase consumer confidence so that the local crypto market can continue to grow.
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