By Sheila Bertillo
Juan Miguel C. De La Cruz of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW) wrote in a column for BusinessWorld his interpretation of the Bangko Sentral ng Pilipinas’ Circular no. 1108 (Guidelines for Virtual Asset Service Providers) regarding the regulation of non-fungible tokens as virtual assets. In the column, De La Cruz said virtual assets issued for use in an online game whether as payment of virtual goods or services within that online game are not included in Bangko Sentral ng Pilipinas’ (BSP) definition of Virtual assets. However, it does not mean that popular gaming tokens of today fall under that exclusion.
VASP Guidelines Recap
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“This year, the BSP issued Circular No. 1108 which requires Virtual Asset Service Providers (VASPs) to secure a Certificate of Authority to operate such a service. Under the Circular, Virtual Asset (VA) refers to ‘any type of digital unit that can be digitally traded, or transferred, and can be used for payment or investment purposes.’ It is used as a medium of exchange or a form of digitally stored value created by agreement within the community of VA users.” Virtual Currency (VC) exchanges are also considered as VASP under the Circular,” De La Cruz wrote.
“In the Philippines, no government regulation has attempted to provide a categorical definition of NFTs,” De La Cruz added, while pointing out that BSP and the SEC have recognized their emergence.
Virtual Assets and NFTs
In the same column he explained that the BSP’s definition of a token and virtual asset respectively exclude “a digital representation of value issued by or on behalf of the publisher and used within an online game or game platform sold by the same publisher or offered on the same game platform” and “the payment of virtual goods and services within an online game (e.g., gaming tokens).”” De La Cruz, however, noted that it is not clear whether Non-Fungible Tokens (NFTs) obtained through Play-to-Earn games, like Axie Infinity’s SLP, fall within such exclusion, particularly with the convertibility of the token into real currency and their potential use outside of gaming. (Read More: In the Philippines, More People are Searching for Axie Infinity than DeFi, Ethereum)
In principle, NFTs are a sort of intangible property which denotes something of value that is used in play-to-earn games to progress. To obtain NFTs, one is required to spend real money (although some NFTs can be acquired for free), to be converted into a cryptocurrency through the use of electronic instruments such as e-wallets. Note that the NFT holder may choose not to sell their NFT for an equivalent crypto value
Axie Infinity, the leading play-to-earn game, requires a player to purchase creatures known as Axies to participate in battles to win SLP. Progress in in the game will reward players with “Smooth Love Potions” (SLP); this can be used to breed Axies and can also be exchanged for real money. (Read More: How to Trade SLP, AXS, ETH to PHP Instantly Through BloomX)
Axies as NFTs, are unique as no two of them are the same. These Axies can be bought and sold in the dedicated marketplace using Ether. Subsequently as the transaction is based on cryptocurrency, the equivalent amount in pesos or fiat will differ depending on the exchange rate at the time. (Read More: Play to Earn: Make Money Playing Axie Infinity)
The Axie Infinity Phenomenon in the Philippines
Recent report suggests that the majority of Axie Infinity players are in the Philippines. In a newsletter, Luis Buenaventura, co-founder of BloomX estimates that roughly Php 2 billion are remitted to the Philippines via trading of SLP to Php in June 2021 alone. “To put that into perspective: 2 billion pesos is the average amount of remittances that ALL the OFWs living in Hong Kong send back home to the Philippines each month. But there are 800,000 of them stationed there! And don’t even get me started on how exploitative their living conditions are. Meanwhile, these Axie gamers are playing from their own bedrooms 3-4 hours a day, and making 4x as much. (Not to mention that they’re spending their money here, bolstering the local economy.)”
In an op-ed on Coindesk, Leah Callon-Butler, Director of consulting firm Emfarsis writes, “Let’s be conservative and assume the average Axie player earns about 150 SLP daily. If SLP is trading at $0.20, and there are one million Filipino DAU, that would bring in US$10.8 billion annually. This is totally conceivable when you think of it as less than 1% user adoption in a country with a populace of 111 million, or if you think of it as a slice of the total revenue that could be generated by play-to-earn as a sector.”
Virtual Assets Do Not have Legal Tender Status
“In any event, users should be made aware of the limitations of tokens and VAs. The BSP has clarified that VAs are not issued nor guaranteed by any jurisdiction and do not have legal tender status. Because of price volatility, VC holders may incur significant losses when trading or investing in VCs. VCs (and by extension VAs) are not considered as deposits; hence, VC holders cannot claim deposit insurance from the Philippine Deposit Insurance Corporation. In contrast, real currency is fully backed by the government of a country, and is acceptable as payment for public and private debts.” De La Cruz reiterated in his article.
Bangko Sentral ng Pilipinas (BSP) Deputy Director Leah Irao to be cautious with “cryptocurrency based games,” reminding the public not to risk money on unfamiliar things and to only transact with registered entities. (Read More: BSP Director: No Specific Guidance on NFT Games (Report))
This article is published on BitPinas: Are NFTs and Gaming Tokens Subject to Same Rules as All of Crypto in the Philippines?