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Virtual currencies see slow take-up rate in PHL

As one of the first countries to legalize and regulate the use of virtual currencies, the  Bangko Sentral ng Pilipinas (BSP) said it is continuously looking into the evolving risks and opportunities behind this fast-growing financial technology.

Earlier this year, the BSP responded to the rising popularity of virtual currency-based payments and remittance transactions in the country and around the world through its issuance of a pioneering regulatory framework for the exchanges of such entities operating in the country.

Virtual currencies—bitcoins in its most popular form—are digital money not issued by the Central Bank. Unlike electronic money that is backed by cash for the entirety of its value, bitcoins are not backed by any commodity but by the mere ability of its holder to exchange them for goods.

In February the BSP launched the set of guidelines on virtual currency—a first of its kind in Asia—seeking to “balance the interests” of welcoming technological advancements in the monetary sector and proactively addressing the risks that come with such innovations.

Five months after the issuance of the regulatory guidelines under BSP Circular 944, the Central Bank’s Supervision and Examination Sector told the BusinessMirror it received less than 10 applications from entities that are interested to be registered as virtual-currency exchanges.

“We have reviewed the business models of some of the applicants and are awaiting their submission of additional requirements. We have not yet issued a certificate of registration for any virtual-currency exchange,” BSP Sector In Charge for the Supervision and Examination Sector Chuchi Fonacier said.

“We have observed acceleration in transaction volume based on our survey of top industry players last year, prompting us to institute a regulatory framework. We have no updated statistics to date, as these will come from the regular reports that registered entities will submit to the BSP,” Fonacier added.

Part of the requirements upon registration to the BSP as a virtual-currency exchange is the submission of periodic reports to aid the Central Bank in monitoring the virtual-currency usage in the country, which is estimated at around $6 million per month for certain major players.

“We want to maximize the benefits from this technological innovation, while adequately managing the risks that come with it. Virtual currencies can help accelerate the delivery of financial services [e.g., payments and remittance] and lower the cost of transactions, which is consistent with our broader financial-inclusion agenda,” Fonacier told the BusinessMirror.

While other countries have taken a more hostile stance on virtual currencies circulating in their jurisdiction, the BSP said its more positive approach to does not necessarily equate to more relaxed monitoring and surveillance of risks.

“We are particularly keen on addressing money-laundering risk, that is why part of the responsibilities of a virtual-currency exchange is to comply with established anti-money laundering rules, such as know-your-client procedures, as well as proper reporting to the AMLC [Anti-Money Laundering Council],” Fonacier said.

The BSP official also warned of the safety of financial consumers against potential virtual-currency theft. “Virtual currencies in your digital wallet can get stolen—when buying virtual currencies, the same are stored in a ‘digital wallet’, on a computer, laptop, PC, tablet or smartphone. This digital wallet makes use of public and private keys or passwords that allow you to secure your wallet,” Fonacier said.

“You are not protected when using virtual currencies for payment. Payments made through virtual currencies, like bitcoin, are immediate, direct and nonreversible. The value of your virtual currencies cannot be guaranteed and can change quickly. The value of virtual currencies has shown several sharp increases for the past year, and several sharp
decreases, as well,” she added.

The BSP said, aside from the upcoming reporting template that registered virtual-currency exchanges will be using to report to the central bank, they are not looking into any additional regulation in the pipeline for virtual currencies as of this time, as they await further data and developments from their earlier launched regulatory framework. “Nevertheless, we continue to monitor developments in this area and stand ready to take appropriate action on significant risks that may arise,” Fonacier said.

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