Published 23 July 2018, The Daily Tribune
There is a growing number of virtual currency exchange operators in the Philippines.
The virtual currency (VC) is a type of digital “currency” created by a community of online users, is stored in electronic wallets, and generally transacted online. The most common type of VC is “bitcoin”. VC is different from e-moneys like GCash and PayMaya – the latter is considered as a legal tender and is convertible to fiat currency in licensed e-money issuers or e-money agents (www.bsp.gov.ph/downloads).
Before investing money in VCs or entering into a VC exchange business, it is best to first check the current rules of Bangko Sentral ng Pilipinas (BSP) on the matter.
Under Subsection 4512N.1 of the Manual of Regulations of Non-Bank Financial Institutions (MORNBFI), VC is considered to be similar to remittance and transfer companies in the Anti-Money Laundering Act. As such, a VC exchange is also required to obtain a Certificate of Registration (COR) to operate as a remittance and transfer company with BSP and is subject to several reporting requirements.
Moreover, a VC exchange is covered by the Know-Your-Customer (KYC) Rules under the Anti-Money Laundering Regulations of BSP. Under Section 4802Q of MORNBFI, covered persons are those “banks, non-banks, QBs, trust entities, non-stock savings and loan associations, pawnshops, foreign exchange dealers, money changers, remittance and transfer companies, electronic money issuers and other financial institutions which under special laws are subject to Bangko Sentral supervision and/or regulation, including their subsidiaries and affiliates, which are also covered persons, wherever they may be located.”
Based on the foregoing, VC exchanges are required to conduct Customer Due Diligence/KYC in which a risk-based approach shall be undertaken depending on the type of customer, business relationship or nature of the product, transaction or activity. Specifically, the VC exchanges must have a system which ensures to do the following:
This KYC shall be required in four (4) instances:
It must be emphasized that based on the foregoing, the mere opening of an account or a single transaction/two or more transactions believed to be linked having an aggregate value exceeding PHP 5,000.00 with the VC exchange shall require KYC.
If one would like to invest in VCs or to enter into a VC exchange business, he must then be prepared to comply with the BSP regulations, especially the KYC rules. The implementation of KYC procedures may, in fact, be complex, considering the comparably complex nature of virtual currencies. Lastly, considering the continuous growth of VCs worldwide, it is quite sure that more and more rules will be crafted to regulate the same. Play it smart but play by the rules. Otherwise, you may end up beaten in the virtual currency craze.
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