By Judith Balea for TechInAsia
The Philippine central bank has decided to regulate virtual currencies, particularly Bitcoin, with more and more people using it to transfer money across borders.
Taking its cue from Japan, the first country to issue rules for Bitcoin in Asia, the central bank finally recognizes that the cryptocurrency “has the potential to revolutionize delivery of financial services” and “further support financial inclusion.”
However, it wants to manage the risks involved, saying it could be used to transfer dirty money (i.e., laundered cash, terrorist financing). It also made clear that it doesn’t endorse Bitcoin as a currency.
The central bank’s new circular, which takes effect in two weeks, covers entities that facilitate the conversion of Bitcoin or any virtual currency into fiat currency and vice versa.
Bitcoin startups expect the new rules to have little impact on their operations.
In Manila, Bitcoin is largely used for remittances and payments – with transaction volumes reaching up to US$6 million per month for certain major players – hence, Bitcoin companies are now to be treated as remittance companies.
That means that all requirements for remittance companies such as registration, minimum capital, internal controls, regulatory reports, and compliance with know-your-customer (KYC) and anti-money laundering (AML) policies shall apply to Bitcoin startups.
A welcome decision
“We’ve been working with the central bank in the last two years to come up with the proper regulatory framework in which Bitcoin companies can operate within the bounds of the law, and it has provided exactly that,” said John Bailon, co-founder of Satoshi Citadel Industries.
Coins.ph co-founder Ron Hose also applauded the move. “It recognizes the potential of the technology and sets standards that need to be met by players in this industry.”
Luis Buenaventura, co-founder of BloomSolutions, dubbed the new rules well-meaning and a step forward but pointed out how it “overreaches by essentially treating Bitcoin business ideas in a one-size-fits-all way.”
“The idea that every Bitcoin company that performs currency conversion is now a ‘remittance’ company means that startup concepts like Bitpay won’t work here, because these types of business models aren’t fundamentally structured around money transfer but need to comply as if they were,” he explained. Bitpay is a payment processor that allows people to buy stuff from online vendors using Bitcoin instead of their credit cards.
Yet John believes it’s still the best move for the central bank. “It allowed them to be swift enough to support Bitcoin companies. They didn’t have to build a regulatory framework from scratch.”
The startups expect the new rules to have little impact on their operations, especially on their ability to provide cheaper services than traditional money wiring firms and banks.
Bitcoin companies were known to save on costs due to lack of KYC and AML compliance that are imposed on traditional providers.
“Coins.ph has taken great effort to build a strong compliance program. Fortunately, this means we can expect fairly minimal effect on our operations as we continue to uphold the same stringent practices we have held so far,” said Ron.
“There will be new operational costs for us, but we can absorb those,” said John. “The only impact our users would expect is stricter KYC policies, which is fine because we’ve been slowly implementing such strict rules in preparation for the circular.”
First appeared at TIA