BSP Releases Guidelines Regulating Virtual Currencies Exchanges
In its resolution dated 19 January 2017, the Monetary Board approved a new set of rules and regulations that would govern the operations of virtual currency exchanges in the country. The guidelines are to be incorporated in §4512N of the Manual of Regulations for Non-Bank Financial Institutions. The guidelines were made in recognition of the potential of virtual currencies in revolutionising the delivery of financial services and the risks that accompany it including consumer protection and the susceptibility to be used in illegal activities.
The guidelines define the term a virtual currency, such as BitCoin, as any type of digital unit that is used as a medium of exchange or a form of digitally stored value by agreement within the community of virtual currency users. As opposed to fiat currency, virtual currency is not issued nor guaranteed by any jurisdiction nor have a legal tender status.
The guidelines also require virtual exchanges to obtain a certificate of registration from the BSP to operate similar to a remittance and transfer company as mandated by BSP Circular 942 Series 2017. Further, the guidelines also require that large-payouts of more than P500,00 in any single transaction to be made only via check payment or direct credit to deposit accounts.
To protect consumers, the guidelines require virtual exchanges to put in place an adequate risk management and security control mechanisms to mitigate the technology risks associated with virtual currencies. Moreover, BSP requires exchanges to submit reports to the BSP such as audited financial statements, reports on total volume of virtual currencies transacted, and list of operating websites and offices. Delay or failure to do so would subject the exchange to appropriate sanctions.
The full circular containing the guidelines was released on 6 February 2017 and may be found at this link.