List of Eight Notable Crypto Regulations in the Philippines

Updated on Jan. 6, 2025: to add SEC Draft Rules for Crypto Assets Service Providers in the Philippines:

• To cater to the growing cryptocurrency industry in the country, the regulators have implemented rules and guidelines to oversee the market.
• The article also discussed the impact of these crypto-related regulations on the Philippine market.

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In this article, BitPinas discusses the eight notable Philippine regulations that affect the country’s crypto-related market.

List of Regulatory Licenses, Guidelines, & Bills

Virtual Asset Service Providers (BSP) License

The Virtual Asset Service Providers (VASP) license allows entities to legally facilitate the exchange between virtual assets and fiat currency, virtual asset to virtual asset, and custody or transfer of virtual assets. 

• Formerly known as the guidelines for virtual currency exchange (VCE), the Bangko Sentral ng Pilipinas (BSP) has recently revised it in 2021 to align with the regulations and recommendations set forth by the Financial Action Task Force (FATF), an international body combating money laundering.

In its updated Guidelines for Virtual Asset Service Providers, the BSP acknowledged the transformative potential of virtual assets (VA) in revolutionizing financial services by enabling faster, more affordable fund transfers and facilitating financial inclusion. 

Accordingly, the BSP also emphasizes the risks associated with factors such as increased anonymity, rapid transaction speeds, price volatility, and cybersecurity vulnerabilities. (Read more: Philippines Guidelines on Virtual Asset Service Providers (VASPs))

However, in August 2022, the central bank announced a temporary halt on approving new VASPs for a period of three years, effective September 1, 2022. Companies will not be able to apply for a VASP license. The decision aims to facilitate a thorough review of the existing virtual asset market in the Philippines. (Read more: Insights on BSP Guidelines for Virtual Asset Service Providers by Atty. Rafael Padilla)

Impact: 

The existence of a VASP license in the country provides a regulated framework for facilitating the exchange and custody of virtual assets, ensuring transparency and compliance. The BSP’s recognition of the transformative potential of virtual assets highlights their ability to revolutionize financial services by enabling faster and more affordable fund transfers and promoting financial inclusion. 

Additionally, the VASP license encourages financial innovation and technological advancements, fostering a forward-thinking approach. 

Precursor on Virtual Currencies (BSP)

Before VASP existed, the central bank issued BSP Circular No. 944 on February 6, 2017. This was to further address the growing industry of digital currencies in the country at that time. 

SEC Draft Rules for Crypto Assets Service Providers in the Philippines

SEC has unveiled a draft of the “SEC Rules on Crypto-Asset Service Providers” (CASP), designed to create a comprehensive regulatory framework for entities providing crypto-related services.

Coverage and Applicability

• Applies to all entities offering crypto-asset services in the Philippines or affecting its markets.
• Acknowledges overlapping regulatory authority (e.g., BSP for Virtual Asset Service Providers).
• Ensures alignment with broader financial regulations.

Registration Requirements

• CASPs must secure a license before operating.
• Minimum qualifications:
  • Incorporation as a stock corporation registered with the SEC.
  • At least four local staff members.
  • Compliance with SEC-set capital requirements.
• Applications must show capacity to meet ongoing regulatory obligations.
• SEC can amend requirements or impose a licensing moratorium.

Public Offering of Crypto-Assets

• Must comply with disclosure requirements, including:
  • Issuer details, asset features, risks, and blockchain specifics.
• Mandatory warnings on:
  • Total value loss potential.
  • Liquidity or transferability issues.
• Exemptions for:
  • Airdrops.
  • Blockchain rewards.
  • Tokens in closed merchant networks.

Public Offering of Crypto-Asset Securities

• Classified as securities if meeting the Securities Regulation Code (SRC) definition.
• Requires SEC registration, covering Initial Coin Offerings (ICOs).

Admission to Trading

• Exchanges or platforms must comply with prior rules.
• Prohibited activities:
  • Supporting gambling-linked or anonymity-focused assets.
  • Offering derivatives, margin trading, or futures without SEC approval.
• SEC can order the removal of crypto-assets to protect investors.

Marketing and Promotion

• Marketing includes social media, events, and educational content.
• Unauthorized entities cannot promote crypto-assets.
• Marketing materials must:
  • Use plain language.
  • Clearly disclose risks without misleading information.
• CASPs are accountable for third-party marketers’ compliance.

SEC AML Rules Compliance

• CASPs classified as “covered persons” under AMLA.
• Obligated to comply with AML, CFT, and CPF laws.

Continuing Obligations of CASPs

• Must:
  • Detect and report market abuse.
  • Maintain surveillance and cybersecurity measures.
  • Conduct annual reviews, especially after new launches.

Prohibition on Market Manipulation and Insider Trading

• Prohibited practices:
  • Price manipulation (e.g., wash trading).
  • Misusing non-public information for trading.
• CASPs must keep insider lists and ensure confidentiality.

Cybersecurity Framework

• Required to adopt measures aligned with the National Cybersecurity Plan and global standards.
• Must comply with SEC cybersecurity guidelines.

Audit and Review

• SEC will audit CASPs for compliance, cybersecurity, and risk management.

Enforcement Power of SEC

• Can:
  • Investigate violations.
  • Impose fines or suspensions.
  • Revoke licenses after due process.
• Investigations remain confidential until formal actions are taken.

Grounds for Suspension or Revocation

• Grounds include:
  • Misrepresentation in applications.
  • Rule violations or non-compliance.
  • Fraudulent activities or unauthorized operations.
• Suspension process includes hearings and initial confidentiality.

Liability, Sanctions, and Settlements

• CASPs are liable for employee and agent misconduct.
• Penalties:
  • Fines: ₱50,000 to ₱10 million, with higher penalties for ongoing violations.
  • Settlement offers allowed if in public interest.

Penalties and Laws

• Violations may result in:
  • Imprisonment: 1–5 years.
  • Fines: ₱50,000 – ₱2 million.
  • Both penalties for individuals and corporate officers.
• Rules supplement the SRC, FCPA, and other SEC regulations.

Guidelines on Initial Coin Offerings (SEC)

An Initial Coin Offering (ICO) in the Philippines refers to a fundraising method utilized by cryptocurrency startups or projects to raise capital by offering digital tokens or coins to investors or contributors. 

ICOs in the Philippines are subject to regulations imposed by the Securities and Exchange Commission (SEC) to protect investors and ensure compliance with securities laws. The first draft of the ICO guidelines was released in August 2018. Then, in 2019, the Commission stated that the guidelines for the ICO had entered their final review.

This regulation is set to provide transparency, prevent fraudulent activities, and promote a secure investment environment within the country’s cryptocurrency ecosystem.

Bataan Charter (R.A. 11453)

On August 30, 2019, former President Rodrigo Duterte signed the R.A. 11453, which bestowed the Authority of the Freeport Area of Bataan (AFAB) with the authority “to act as an offshore financial center” specializing in cryptocurrency mining.

The R.A. 11453, also known as the “Freeport Area of Bataan Act of 2019,” grants the AFAB the power and jurisdiction to establish and operate a freeport zone in Bataan province that is authorized to engage in various economic activities within the freeport, including cryptocurrency mining, to promote economic growth and attract investments to the area.

Impact:

Accordingly, the law promotes economic development by attracting investment, creating job opportunities, and generating revenue for the region. It also encourages technological advancement and innovation by fostering the adoption and utilization of advanced technologies related to cryptocurrencies and blockchain. 

Digital Asset Bill (2019 Bill)

Senate Bill 1041, also known as the “Digital Asset Act of 2019,” was introduced by Senator Imee Marcos, aiming to bring clarity and institutionalize regulations for digital assets in the Philippines. 

The bill sought to define and standardize the rules surrounding digital assets while recognizing their significance in the country’s financial landscape. While it does not directly regulate digital assets, it provides a framework for licensing and operating e-money, virtual asset exchanges, and virtual asset businesses.

Read the key takeaways from BitPinas EIC Michael Mislos about the bill here. 

Under the proposed bill, the Bangko Sentral ng Pilipinas (BSP) would take the lead in overseeing e-money operations. It would establish policies to monitor e-money and e-money issuers, including the issuance of rules and the determination of fees. The BSP would become the sole entity authorized to issue e-money licenses, and licensees would also need to register with the Anti-Money Laundering Council Secretariat.

On the other hand, the bill designates the Securities and Exchange Commission (SEC) as the lead agency for virtual assets. Virtual assets, encompassing virtual currencies and virtual tokens, would fall under the SEC’s jurisdiction for the offering, issuance, and operation of virtual asset businesses. The SEC would have the authority to establish policies and rules governing virtual assets and disclose information related to any violations.

Securities Regulation Code (SEC)

The Securities and Regulation Code (SRC) grants the Commission the authority and responsibilities to oversee and regulate exchanges, clearing agencies, and self-regulatory organizations (SROs). 

Its objective is to foster national economic development and ensure competitive market pricing, mandating the SEC to establish rules and regulations for the registration and licensing of various trading markets, including those for innovative securities, securities of small and medium-sized enterprises, growth enterprises, venture enterprises, and technology-based ventures. 

This provision also aims to facilitate the growth and development of these sectors and promote a regulatory environment conducive to innovation and market expansion.

Meanwhile, about cryptocurrency and digital asset regulation, the SRC is often utilized to shut down investment scams that are considered ‌investment solicitations and to flag the unauthorized sale of digital assets as securities. 

Read how the SEC has explained the accountabilities of influencers in scam projects here. 

Impact:

Considering that there are still no definite rules and regulations addressing digital assets in the Philippines, the existence of the SRC helps the regulators to still oversee the digital industry and regulate entities in accordance with the law.

In the context of the crypto industry, the positive impact of the SRC lies in its ability to provide a regulatory framework for exchanges, clearing agencies, and self-regulatory organizations (SROs) involved in digital asset trading. 

The establishment of rules and regulations for the registration and licensing of various trading markets, including those specific to cryptocurrencies and digital assets, also helps create a transparent and secure environment for investors and market participants. This promotes trust and confidence in the crypto industry, fostering its growth and development. 

This article is published on BitPinas: What are the Seven Notable Crypto-Related Regulations in PH & Their Impact on the Community?

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