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Investing in Bitcoin with Maharlika Fund? Crypto Lawyer Weighs In

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  • Atty. Rafael Padilla discussed the potential of using the recently passed Maharlika Investment Fund Act to invest in Bitcoin during a BitPinas Webcast. 
  • The Maharlika Investment Fund is the Philippines’ inaugural sovereign wealth fund, designed to achieve steady investment returns while preserving and growing the fund’s value. 
  • Padilla indicated that investing in Bitcoin through the Maharlika Investment Fund (MIF) could be legally viable, contingent upon approval, due to a clause permitting “other investments.”

“In theory, it is possible.” 

Atty. Rafael Padilla, the co-founder of BlockDevs Asia and one of the popular lawyers in the crypto space, shared his opinions regarding the possibility of utilizing the newly signed Maharlika Investment Fund Act to invest in Bitcoin. 

He answered this during the 18th edition of BitPinas Webcast on August 11, 2023. BloomX Co-Founder and Bitcoiner Ramon Tayag was also part of the discussion.

Can Maharlika Investment Fund really buy and invest in Bitcoin? 

Expert Opinion: Can Maharlika Fund and Bitcoin Blend?

According to Padilla, in terms of legal provisions, companies, and even countries, can hold Bitcoin in their reserves as there are no restrictions regarding that so far. 

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The fintech lawyer also emphasized that as of now, there are no legal restrictions on companies holding Bitcoin in their treasuries as reserves:

“As to nation states adopting Bitcoin, according to their respective laws, there may be restrictions, but if we’ll compare it here in the Philippines… Walang legal restrictions for the BSP (Bangko Sentral ng Pilipinas) to do that.” 

[“As to nation states adopting Bitcoin, according to their respective laws, there may be restrictions, but if we will compare it here in the Philippines, there are no legal restrictions for the central bank to do that.”]

For Padilla, theoretically, complying with the requirements of the MIF, investing in Bitcoin through the fund is legally viable, contingent upon obtaining approval, given the presence of a clause that permits the MIF to engage in “other investments.”

“It is possible, as long as i-approve kasi mayroong provision doon na nagsasabing ‘other investments,’ ini-enumerate kung saan pwedeng mag-invest tapos mayroong ‘catch all.’ Basically, basta in-approve ng board, pwedeng mag-invest; which means, in my mind, presents the opportunity na if the Maharlika Fund would want to, they can also invest in Bitcoin,” he pointed out.

[“It is possible as long as it is approved because there is a provision there that states ‘other investments,’ enumerating where one can invest, and there’s a ‘catch-all.’ Basically, as long as the board approves, investing is allowed; which means, in my mind, it presents the opportunity that if the Maharlika Fund would like to, they can also invest in Bitcoin.”]

Clarifying his legal opinion, Padilla then remarked that ‌MIF investing in Bitcoin is still a matter of monetary policy, economic policy, and political policy, and only the government can make the decision of whether or not to invest.

Maharlika Investment Fund: a Comprehensive Guide

The Maharlika Investment Fund (MIF) or Republic Act (RA) 11954, enacted last month by House Bill 6398, is the Philippines’ first sovereign wealth fund. 

Basically, its purpose is to achieve steady and reliable investment returns within acceptable risk boundaries, preserving and growing the fund’s value over time. This involves attaining optimal absolute returns and feasible financial gains from investments while meeting criteria such as liquidity, safety, and yield for profitability.

The initial funding of ₱250 billion for the MIF will be sourced from the Government Service Insurance System (GSIS), Social Security System (SSS), Land Bank of the Philippines (LBP), and the Development Bank of the Philippines (DBP). 

According to its act provisions, the fund will be utilized to invest in key sectors, such as foreign currencies, domestic and foreign corporate bonds, commercial real estate, and infrastructure projects.

Moreover, the MIC is set to have an authorized capital stock of P500 billion, with  ₱375 billion for common shares available for subscription by the national government, its agencies; government-owned and controlled corporations (GOCCs), or government financial institutions (GFIs). 

Out of the  ₱375 billion,  ₱125 billion will be contributed by the Land Bank of the Philippines (LBP), the Development Bank of the Philippines (DBP), and the national government. The national government’s contribution will include dividends from the BSP, its share in the income of the Philippine Amusement and Gaming Corporation (PAGCOR), proceeds from privatization, and other sources.

The remaining P125 billion in capital will have preferred shares for subscription by the national government, its agencies, GOCCs, GFIs, and reputable private financial institutions and corporations.

The fund is supported by some of President Ferdinand Marcos Jr.’s family members in the government and will be administered by Maharlika Investments Corp. (MIC), a government-owned and controlled corporation

The MIC will be governed by a nine-member board of directors, with the finance secretary serving as chairman; the current Department of Finance (DOF) Secretary is former Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno. MIC members include the CEOs of MIC, LBP, and DBP, as well as two regular and three independent directors from the private sector.

The corporation also has an advisory body composed of the heads of the Department of Budget and Management (DBM), the National Economic and Development Authority (NEDA), and the Bureau of the Treasury.

Bitcoin: An Investment Vehicle

Investors are attracted to Bitcoin for a variety of reasons, including its potential for significant returns, diversification benefits, and long-term growth potential. 

Its past performance of generating substantial profits makes it enticing for those seeking to exploit its price volatility for financial gain. In fact, the all-time high for Bitcoin reached $68,789.63 (around ₱3.8 million) on November 8, 2021.

In addition, Bitcoin’s relatively low correlation with conventional assets makes it an appealing option for portfolio diversification, providing a means to reduce overall investment risk.

Bitcoin is also compared to digital gold because of its finite supply of just 21 million—now with only around 2 million left to mine—and decentralized nature, which makes it a good long-term investment. It’s considered a potential hedge against inflation and government interference in traditional currencies. 

Further, investors are drawn to the transformative potential of Bitcoin and blockchain technology, while its price volatility provides trading opportunities. Its censorship resistance also appeals to those seeking financial control, especially in unstable economies. 

In the Philippines, the adoption of cryptocurrency is growing for its use in remittances, online freelancing, and investment opportunities. The country’s large OFW population, high traditional remittance fees, and recognition of Bitcoin as an investment asset have all contributed to its popularity. Bitcoin is also increasingly preferred for freelance payments and expanding financial inclusion. 

As BTC investment gains credibility similar to traditional finance, it could lead to clearer regulations, wider public adoption, and global recognition as a valuable asset. 

Nonetheless, due to its volatility investing in Bitcoin is still risky and past performance is no guarantee of future results. 

This article is published on BitPinas: BTC OG Answers: Can Maharlika Fund be Used to Invest in BTC

Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.

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