BSP eyes rules on use of virtual currency

The Bangko Sentral ng Pilipinas (BSP) will soon draft rules to govern the use of bitcoin as the country becomes one of the fastest-growing markets for the virtual currency.

BSP Deputy Governor Nestor A. Espenilla Jr. also told reporters that monetary authorities were reviewing industry proposals to ease the cap on foreign exchange transactions.

Espenilla said data showed that the Philippines was third-fastest in the world in terms of bitcoin applications as growth in the first half of last year exceeded 100 percent.

“In the Philippines, bitcoin exchanges or estimated transactions passing through registered companies here range between $2 million and $3 million a month. So it is not a small amount of transactions,” Espenilla pointed out.

While the BSP has already been issuing advisories to the public warning of risks in using such virtual currency, Espenilla said the surge in transaction volume might lead to tighter rules in their usage.

“We are looking at formally regulating virtual currencies for two important reasons: Aspects of money laundering and consumer protection concerns,” Espenilla said.

The BSP official said they would revisit Circular Letter 471 “to define the regulatory environment of virtual currencies in the Philippines.”

Also, Espenilla said the BSP was studying the banking industry’s proposal to raise the forex trade cap while also “tightening and strengthening” regulations covering remittance companies and money changers.

The Bankers Association of the Philippines (BAP) earlier proposed liberalizing, with attendant safeguards, the undocumented foreign exchange limit in order to discourage legitimate foreign exchange deals from going to the “black market” or foreign exchange brokerage and money changers outside the formal banking system.

The BAP had also proposed to raise to $2 million from $120,000 at present the amount of foreign exchange that banks could sell to residents without prior BSP approval. The BSP currently requires banks to secure underlying documents from clients who want to buy more than $120,000 a day from the banking system.

About 85 percent of foreign exchange transactions in the country were being conducted outside the banking system, industry estimates showed, as foreign exchange and money changing services were legal as long as these were registered.

The BAP has suggested tighter regulations on money changers.

In April, the BSP ordered banks to “take extra caution” when dealing foreign exchange dealers, money changers and remittance agents after $81 million in dirty money stolen from Bangladesh’s central bank last February was laundered in the country through a branch of Rizal Commercial Banking Corp.