Two bitcoin exchanges now under BSP oversight

By Melissa Luz T. Lopez, Senior Reporter

THE BANGKO SENTRAL ng Pilipinas (BSP) now oversees the operations of two bitcoin platforms, which comes after it issued rules on digital currencies earlier this year.

BSP Governor Nestor A. Espenilla, Jr. said on Friday that the central bank currently regulates two bitcoin exchanges operating in the Philippines, following the issuance of Circular 944 which required the virtual currency providers to be under their watch.

Mr. Espenilla said these were “local-based” firms “with international roots.”

“The reason why we created the requirement is because we see a rapid increase in the trajectory. It is coming from a small base, but it is growing fast – that is why we decided to increase the level of engagement by requiring the registration process,” Mr. Espenilla told reporters on the sidelines of a roundtable discussion with FINTQ on financial technology.

The BSP chief estimates that virtual currency transactions from these two firms alone are now worth $6 million a month, which is a marked increase from a monthly average of $2 million two years ago.

In February, the central bank announced that all platforms converting digital currencies to cash must be accredited by the regulator, and must adhere to existing rules imposed on remittance agents including the reporting of potential dirty money transactions.

A bitcoin is among the types of easily-transferable electronic currency used for paying goods sold via the Internet, and may also serve as an investment for its holders given its fluctuating valuations. It is a form of digital money that is not issued or guaranteed by a central bank, and can be sent or received by anonymous users internationally.

Any person can buy and sell bitcoins, which may be traded by tapping the services of bitcoin dealers or brokers who look for good deals for a bitcoin investor; going to bitcoin exchanges – an establishment that allows bitcoin holders to directly buy and sell the virtual currency; participate in a “mining pool” – a group of individuals with top-of-the-line computers that can solve complex math problems to unlock codes in exchange for a bitcoin; or look for someone to trade cash or goods for bitcoins.

Under the new rules, all virtual currency exchanges need to secure a certificate of registration from the BSP to operate as a remittance and transfer company. They should likewise adopt internal controls for risk management and cybersecurity, similar to those required of banks and other financial firms.

“That’s the importance of putting them under the regulatory framework. They will have to comply with anti-money laundering regulations,” Mr. Espenilla said.

The virtual currency exchanges must also submit quarterly reports on volumes transacted and annual financial statements to the central bank.

Other virtual currencies used globally include ethereum, litecoin, and ripple, to name a few.

The central bank chief also noted that tighter guidelines on cybersecurity will soon be introduced covering all of its supervised entities, while the BSP studies plans to use digital tools for its regulatory oversight.

Mr. Espenilla has been promoting the National Retail Payments System which looks to bring more financial transactions done electronically, a move seen to fast-track settlements and bring more Filipinos aboard formal financial channels.

Some 86% of Filipino households still do not have bank accounts while 36% of towns and cities do not have bank branches, according to data from financial technology provider FINTQ. Meanwhile, Internet penetration hovers close to 60%, with smartphones seen as the new platform that could drive wider financial inclusion in the country.

FINTQ forms part of the digital innovations unit of PLDT, Inc., which offers an online marketplace of financial channels such as digital lending, insurance, micro-investments, and credit scoring.

Hastings Holdings, a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a stake in BusinessWorld through the Philippine Star Group, which it controls.