In this CoinDesk opinion piece, Buenaventura gives his combat new regulations aimed toward bitcoin businesses within the Philippines. Cost burden aside, he argues, there’s reason for entrepreneurs to be optimistic about the changes.
With everyone from Abra to ZipZap using it as either a launch market or a base of regional operations, the Philippines has long been the hub of innovation for bitcoin remittance companies.
Local founders have said it had been only a matter of your time before the financial institution , Bangko Sentral ng Pilipinas (BSP), would come around to regulating the industry, which process finally began in early February of this year.
That’s when when BSP deputy governor Nestor Espenilla announced the financial institution would issue a circular that intended to clear up the government’s position on bitcoin and other cryptocurrency exchanges.
At the time, Espenilla noted that monthly domestic bitcoin volumes within the Philippines had jumped from $1m in 2015, to $5m–$6m the subsequent year, and it had been time for guidelines. That circular is now available (BSP Circular No 944), and can become by the top of the month.
On the surface, the circular appears to require a number of its cues from the japanese Financial Services Agency, which published its own set of regulations for bitcoin exchanges last year, which become this April.
But, there are differences also .
Overall, the preamble emphasizes the BSP’s position around encouraging innovation and financial inclusion – a welcome, if somewhat perfunctory, statement in light of what else the circular contains.
The release reads:
“The Bangko Sentral recognizes that virtual currency systems have the potential to revolutionize delivery of monetary services, particularly for payments and remittance, in sight of their ability to supply faster and more economical transfer of funds, both domestic and international, and should further support financial inclusion.”
Casting a broad net
That’s to not say the circular is without its weak spots.
Because of the way Philippine startups are using bitcoin over the past three years, it appears that the BSP has latched on to the present single use case quite the other .
The BSP doesn’t appear to possess a regulatory position on virtual currencies as an investment, a payment rail, a gambling platform or as a mechanism for offshoring personal assets – all of which are more common use cases for the technology than remittances.
And what exactly may be a virtual currency, within the eyes of the central bank?
Here, the BSP is casting a particularly broad net.
“VCs shall be broadly construed to incorporate digital units of exchange that (1) have a centralized repository or administrator; (2) are decentralized and haven’t any centralized repository or administrator; or (3) could also be created or obtained by computing or manufacturing effort.”
Perhaps it’s within the interest of efficiency – these guidelines cover both centralized and decentralized currencies, blockchain-based or not.
It potentially also covers technology that doesn’t even exist yet, as it’s not entirely clear what it even means to ‘manufacture’ a virtual currency.
But, the BSP does lookout to differentiate ‘virtual currencies’ from ‘mobile money’ – Warcraft gold, Starbucks points and frequent-flier miles. (In the Philippines, mobile money is roofed by a special , arguably more stringent, set of regulations.)
Elsewhere, the definition of ‘virtual currency exchange’ proves tricky.
For one, it doesn’t just cover ‘VC exchanges’ within the way one would expect. It’s been written to incorporate bitcoin wallets and bitcoin payment processors – indeed, any service that facilitates currency conversion. (A wallet provider would be exempt if they didn’t exchange bitcoin for fiat, but those sorts of services would have little use within the Philippines.)
Virtual currency exchanges will further need to obtain a certificate of registration (CoR) with the Anti-Money Laundering Council Secretariat, and also pay annual service fees.
The document it refers to may be a previous circular (No 942), which breaks down the varied fees that require to be paid. In most cases, the registration fees begin to a touch over $2,000, with annual service fees amounting to an equivalent .
Essentially, all VC exchanges are now to be treated as remittance companies.
Effects on the industry
On the face of it, a first-year fee of $2,000 is not any above any traditional money services business within the Philippines would be expected to pay, so it’s not altogether unfair.
The bigger challenge are going to be deciding the way to incorporate the mandatory compliance and reporting workflow without affecting costs. In most cases, this is able to involve hiring additional personnel and retaining legal advice.
So what does this mean for the bitcoin industry within the Philippines?
Overall, it’s excellent news that the govt is finally recognizing startups that are laboring during a legal grey area since 2013. It’s also encouraging that they’ve spent enough time to find out about bitcoin to know what it’s good at.
It certainly seems like the intention is to treat any business handling bitcoin as a remittance agent, albeit remittances aren’t the first purpose of that company. But perhaps most significantly , they are doing not offer a short lived sandbox status to startups with more experimental models.
It will take a short time to completely understand the impact of of these new regulations.
For now, the hope is that it won’t decelerate the innovative momentum that has built up over the past few years in one among the foremost important regions within the world’s most populous continent.