Virtual Currencies have gained a lot of momentum in the past couple of years in the Philippines. The Bangko Sentral ng Pilipinas (BSP) has recognized the revolutionary potential of Virtual Currencies (VCs) for financial services and financial inclusion. The regulator has also taken steps to regulate the operations of VC Exchanges in the country (BSP Circular No 944, Series of 2017), like Coins.ph.
In light of the recent surge in interest into Virtual Currencies, the BSP has issued an advisory (as provided below) which outlines and cautions of the risks involved in Virtual Currency transactions and suggests security measures for VC users.
Virtual currencies (VCs) are seemingly gaining momentum in terms of usage as a medium for payment and remittances in the country. This is largely attributed to their ability to facilitate the movement of funds at a much faster, cheaper, and convenient way. While recognizing the potential benefits, the Bangko Sentral ng Pilipinas (BSP) is equally cognizant of the attendant risks, particularly, their propensity to be used in illicit activities such as money laundering and terrorist financing.
Following the warning advisory issued by the BSP in March 2014, a formal regulatory approach was adopted through the issuance of Circular No. 944 dated 6 February 2017. Under the said issuance, VC exchanges or businesses engaged in the exchange of VCs for equivalent fiat money in the Philippines, are required to register with the BSP as remittance and transfer companies. In view thereof, BSP-registered VC exchanges are now required to put in place adequate safeguards to address the risks associated with VCs such as basic controls on anti-money laundering and terrorist financing, technology risk management and consumer protection. Notwithstanding said issuance, the BSP does not, in any way, endorse VCs as legal tender, store of value or an investment vehicle.
With the recent price surge of VCs, such as Bitcoins, the BSP has observed that an increasing number of individuals or entities may be tempted to “invest” in VC pyramid schemes disguised as initial coin offerings (ICOs) or VC investment products. The public is therefore advised to exercise caution regarding the acquisition, possession, trading of VCs or dealing with VC-related offers. Unlike stocks or debt issues, VCs are not backed by any company or commodity and the price is purely dependent on market demand and supply. As such, investing in VCs presents a highly speculative and risky undertaking which might result into huge financial losses. To minimize risks, the BSP highly encourages existing and prospective VC users to deal only with BSP-registered VC exchanges and maintain only a sufficient amount of VCs enough to address transaction requirements. VC users should properly secure their VC holdings and observe security tips below to protect the confidentiality and integrity of personal information and transaction details.
Important security considerations for VC users:
In addition to this advisory, the BSP has recently issued Frequently Asked Questions (FAQs) on Virtual Currencies, outlining how VCs relate to cryptocurrencies, fiat currency, and e-money. Moreover, they also discuss the potential benefits of, and risks involved in, using VCs that are consistent with their most recent advisory.