Regulate or Restrict? Salceda’s Tax Plan vs. Infrawatch’s Push to Ban Unregulated Exchanges
As the Filipino crypto community anticipates clearer regulations for the industry, 2 differing views emerge on how to approach its management.
- Last month, Representative Joey Salceda filed a resolution directing the House Committees on Ways and Means and Banks and Financial Intermediaries to review the policies of both the BSP and the SEC concerning unregistered cryptocurrency platforms including exchanges.
- Meanwhile, public policy group Infrawatch PH continues to push for a ban on unregulated exchanges by the SEC.
- The proposals emerge out of the fact that there is a current pause in applications for new virtual asset services providers.
- Thus, one other proposal is to just wait it out until the pause is lifted.
In this article, BitPinas will outline the plans of both sides, along with the potential benefits and challenges of their proposed solutions.
Table of Contents
Proposal: Taxing Foreign Exchanges – Salceda
- Salceda proposes taxing foreign cryptocurrency service providers operating in the Philippines but registered abroad as a potential new revenue source for the government.
- These providers may be subject to the newly signed VAT law on Nonresident Digital Service Providers.
- The resolution emphasizes the need to collect additional revenue from the growing digital sector, which includes the crypto industry.
Public Comments:
- The Filipino crypto community: largely opposes a proposed resolution arguing that the government offers no support to these platforms while also lacking the capability to monitor them effectively.
- In 2022, Tax expert Mon Abrea already emphasized the importance of establishing clear regulations for cryptocurrency in the Philippines before taxes can be effectively collected, pointing out that although the tax code is broad, there are still no specific guidelines for taxing crypto.
Potential Benefits:
Apart from being able to generate significant revenue for the government, taxing foreign cryptocurrency service providers could also mean:
- Regulatory Clarity: Establishing a tax framework could encourage a clearer regulatory environment for the growing crypto sector.
- Fair competition:
- Taxing foreign exchanges may encourage local exchanges to compete better with their global counterparts.
- International exchanges are taxed just as their local counterparts do since they both service the same users locally.
- Challenges:
- Execution difficulty: Enforcing taxes on foreign service providers may be difficult, particularly in tracking transactions and ensuring compliance from entities that are not physically present in the country.
- Impact on Users: If taxes are passed onto consumers, it could result in higher fees for services.
- Still no Consumer Protection: The measure is purely for the purpose of ensuring more efficient tax collection and does not mean that the foreign exchanges would be in the oversight of the SEC.
Proposal: Banning Unregulated Exchanges – Infrawatch
- Infrawatch recently called for the SEC to investigate Bitget and OKX due to their unauthorized operations in the Philippines.
- They urge the SEC to issue cease-and-desist orders, impose penalties, and enforce regulations similar to those applied to Binance to safeguard Filipino investors from financial risks and illegal activities associated with peer-to-peer crypto transactions.
Comments:
- The Filipino crypto community reacted negatively to the request to ban unregistered exchanges Bitget and OKX.
- Many are criticizing the government’s crypto regulations, accusing Infrawatch of monopolizing the market, and calling for licensing rather than banning exchanges, while also expressing frustration over the leniency toward gambling platforms.
Benefits:
- Consumer Protection: Banning unregulated exchanges protects Filipino investors from potential scams, fraud, and market manipulation.
- Market Integrity: A crackdown on unauthorized platforms can improve overall market integrity by reducing the presence of potentially harmful actors in the crypto space.
- Encouragement for Compliance: A strict enforcement approach may encourage foreign exchanges to comply with local laws and seek proper licensing to continue operating.
Potential Challenges:
- Access Limitations: Banning popular exchanges may limit options for Filipino investors, leading to frustration and potential migration to less reputable platforms.
- Regulatory Overreach Perception: The aggressive stance against certain exchanges may be perceived as overreach, leading to pushback from the crypto community and accusations of stifling innovation.
- Operational Challenges: Enforcing bans may require significant resources and coordination between government agencies, and there may be challenges in monitoring compliance effectively.
Overall:
As the Filipino crypto community awaits clearer regulations, different perspectives emerge on managing the industry.
- The proposal to tax foreign cryptocurrency exchanges aims to generate government revenue. However, challenges in enforcement and potential impacts on users raise concerns.
- Conversely, Infrawatch said its push for banning unregulated exchanges seeks to safeguard investors from financial risks and enhance market integrity, but it risks limiting access and facing backlash from the crypto community.
Truly, a balanced regulatory approach that encourages innovation while ensuring consumer safety might remain a challenge to achieve in the foreseeable future.
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This article is published on BitPinas: Weigh in on what is the better policy for foreign crypto exchanges; ban them or tax them instead?
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