BSP regulates use of virtual currencies

The Bangko Sentral ng Pilipinas (BSP) has put in place a pioneering move in Asia of regulating virtual currency (VC) transactions by requiring businesses using VCs to register with the central bank to address risks from this technological innovation. (Photo by User:Ramon FVelasquez – https://commons.wikimedia.org/wiki/File:CCPjf0186_04.JPG, CC BY 3.0,)

MANILA—The Bangko Sentral ng Pilipinas (BSP) has put in place a pioneering move in Asia of regulating virtual currency (VC) transactions by requiring businesses using VCs to register with the central bank to address risks from this technological innovation.

In a statement Wednesday, the central bank said its policy-making Monetary Board (MB) recently approved a regulatory framework for VC exchanges wherein companies using this mode of payment are considered as remittance and transfer companies (RTCs).

Under the regulation, RTCs need to register with the BSP, meet the capital requirements, put in place internal controls, and submit regulatory reports and compliance with the Anti-Money Laundering Act.

The BSP said this move aims to prevent anybody from using the Philippines for money laundering and terrorist financing activities and to ensure that the financial system and financial consumers are adequately protected.

“The MB decided to move ahead with adopting a formal regulatory framework in recognition of the rapid growth of VC-based payments and remittance transactions, estimated at around USD5 to USD6 million per month for certain major players,” it said.

VCs were introduced around 2009, and most famous among these is the Bitcoin, which remain unregulated since no central bank has ever issued it.

It is not backed by any commodity such as gold and silver unlike existing legal tenders and coins.

The BSP said the move to regulate VCs’ usage “is essentially aligned with the June 2015 Financial Action Task Force Guidance for a Risk-Based Approach to VCs.”

BSP Circular No. 944 Series of 2017 states that the central bank “does not intend to endorse any VC, such as Bitcoin, as a currency since it is neither issued or guaranteed by a central bank nor backed by any commodity.”

”Rather, the BSP aims to regulate VCs when used for delivery of financial services, particularly for payments and remittances, which have material impact on anti-money laundering (AML) and combating the financing of terrorism (CFT), consumer protection and financial stability,” it said.

It said large value pay-outs of more than PHP500,000 or its equivalent in foreign currency in a single transaction “shall only be made via check payment or direct credit to deposit accounts.”

BSP Deputy Governor Nestor Espenilla Jr. told PNA that VC transactions in the Philippines remain low compared with transactions in other countries in the world “but they seem to be accelerating fast.”

He said “only tiny portion (of Filipinos) today use VC such as Bitcoin to pay.”

Asked for his outlook on use of VCs in the next five years, the central bank official said it is hard to forecast this.

“So many factors are in play, particularly competition. Customer trust in VCs (or the lack of it) remains to be seen,” he added.