Key Takeaways
- The Philippines SEC has introduced new rules directing how crypto asset service providers (CASPs) will conduct their business in the country.
- Service providers are required to obtain licenses and maintain a physical office within the country.
- The government requires the CASPs to educate Filipinos on the risks associated with cryptocurrency investment.
The Philippines’ Securities and Exchange Commission (SEC) recently introduced a new set of rules for crypto asset service providers (CASPs). The regulations require all crypto service providers in the country to register and obtain a license before operating in the country.
According to a statement issued by the Assistant Director of the SEC during the recently concluded Philippine Blockchain Week, the move was necessitated by the surge in digital asset activity and a growing number of fraud cases involving unregistered platforms.
Issue Periodic Reports
In addition to requiring all crypto asset service providers (CASPs) to maintain a paid-up capital of at least $1.8 million, the new rules also establish physical office locations in the country. Moreover, the government requires service providers to submit periodic reports, in addition to complying with Know Your Customer (KYC) and transaction monitoring obligations. Commenting on the development, Paolo Ong, the Assistant Director at the SEC, stated:
“The rules were issued to support local players and go after those unregistered ones […] we believe that the rules will give more teeth to our enforcement team, and they can be more assertive in going after unregistered platforms that are operating in the Philippines.”
Educate Filipino Users on Risks
The new rules for crypto service providers require that customer data be stored within the Philippines, ensuring all operations are conducted by local laws and regulations. Ong also stated that the applicants would be required to separate company funds and customer funds, an emerging burning issue that surfaces when global cryptocurrency exchanges collapse and users lose their assets. Omg further stated:
“The CASP guidelines emphasize segregation of customer funds from exchange funds […] it’s because we see that learning from [the] collapse of other exchanges is a key measure to protect investors [and] funds.”
The government official further stated that the rules require CASPs to ensure Filipino users understand the risks involved with owning crypto assets. He said:
“We’d like Filipinos to access these products, but we require [them] to make them knowledgeable of the risks involved before they can engage with the platform.”
Another critical provision emerging from the statement addressed the subject of marketing and promoting digital asset products online. Ong stated that anyone marketing or inducing the purchase of digital assets would need to get registered as a corporation and hold the necessary SEC license, with limited exceptions for third-party providers. Ong said:
“The standard for us for marketing crypto assets in the Philippines would be simply a Philippine registration of a corporation—basic doing business, a primary license from the SEC […] you don’t need a CASP license for that, just a primary license.”
Conclusion
The implementation of the new rules for crypto service providers is part of a broader effort by the Philippines’ SEC to streamline and enhance the regulatory framework for capital markets and cryptocurrencies. The new regulatory framework aims to create a reliable and secure environment for crypto asset trading, thereby promoting innovation while safeguarding investor interests and positioning the Philippines as a leader in digital asset regulation in the region.
Frequently Asked Questions
Can I use crypto in the Philippines?
Yes, Bitcoin is legal in the Philippines. The Bangko Sentral ng Pilipinas (BSP) regulates cryptocurrency exchanges to ensure they adhere to financial and consumer protection standards.
Is crypto regulated in the Philippines?
Yes, cryptocurrency trading is legal in the Philippines. Applicable laws provide guidelines for virtual asset service providers, treating cryptocurrencies as virtual assets. To operate legally, VASPs need to be registered with the BSP.
Is crypto popular in the Philippines?
It is estimated that nearly 7 million Filipinos, 6.13% of the total population, own cryptocurrency.