Crypto regulation in the Philippines
The Philippines has taken a cautious yet open approach towards cryptocurrencies. While the country has not fully embraced cryptocurrencies as legal tender, the government and regulators have been working to create a balanced regulatory framework that fosters innovation while protecting consumers.
The cryptocurrency market in the Philippines is projected to grow by 2.52% from 2024 to 2025, resulting in a market volume of US$641.5m in 2025. As of 2020, the cryptocurrency transaction volume in the country reached 7.2 million, amounting to 76 billion pesos.
Cryptocurrencies status
In the Philippines, cryptocurrency is legal but not recognized as legal tender. The legal status and regulatory framework surrounding cryptocurrencies are shaped by various laws and guidelines. The Central Bank (BSP) oversees cryptocurrency transactions through Circular No. 944, which establishes guidelines for Virtual Currency Exchanges. This circular does not endorse cryptocurrencies as currency but regulates them to mitigate risks related to money laundering and terrorist financing. VASPs must register with the BSP and comply with operational requirements.
The local SEC has also issued advisories regarding Initial Coin Offerings (ICOs) and cryptocurrency investments. These advisories warn the public about the risks and mandate that companies conducting ICOs register with the SEC and adhere to securities regulations. In January 2023, the SEC presented draft rules for public review related to financial products and services encompassing cryptocurrencies and digital financial products. The proposed guidelines aim to enact a new law, granting the SEC more authority to enforce regulations, oversee the market, and perform inspections and surveillance.
Another law regulating crypto is the Financial Products and Services Consumer Protection Act (FCPA) that has been enacted in 2023, followed by implementing regulations from the BSP and SEC. The FCPA institutionalizes the rights of financial consumers and mandates Financial Service Providers to conduct a gap assessment analysis and develop a board-approved action plan in compliance with the FCPA.
In May 2024, the BSP approved a pilot for PHPC, a Philippine Peso-backed stablecoin issued by Coins.ph, a VASP headquartered in the Philippines. The pilot will take place within the BSP's regulatory sandbox to assess the functionality and potential impact of the stablecoin on the country's financial system.
The SEC also plans to unveil a comprehensive cryptocurrency regulatory framework in the second half of 2024. The framework aims to balance innovation with stringent requirements for financial consumer and investor protection.
Virtual asset service providers (VASPs)
There are a lot of cryptocurrency exchanges operating in the Philippines both international and local ones. The most remarkable local crypto exchanges are: Philippine Digital Asset Exchange (PDAX), Coins.ph and crypto-processing company Juancash.
Under BSP Circular 944, Virtual Currency Exchanges must register with the Central Bank as remittance and transfer companies and have systems in place for consumer protection. BSP also obliges crypto companies to be compliant with the Travel Rule. The regulator has set a minimum threshold of ₱50,000 ($1000) or more, or its equivalent in foreign currency, that triggers the crypto Travel Rule in the Philippines. This requires VASPs to share information about parties involved in cryptocurrency transactions to prevent illicit activities.
Mining
There is no specific legal basis for cryptocurrency mining in the Philippines. The government has not taken any aggressive actions against mining activities, and there are no plans to develop crypto mining in the country.
Taxation
The Philippines does not have any special taxation rules for cryptocurrency income or gains. Crypto-related income and gains are likely subject to the same tax rates as other forms of income. A capital gains tax of up to 15% applies to profits earned from the sale or exchange of cryptocurrencies. This tax is applicable to Filipino citizens who trade or own cryptocurrencies and must be reported during annual tax filings.
Cryptocurrency transactions are also treated as property for tax purposes. Gains from these transactions are included in the taxpayer's gross income and are subject to the graduated income tax rates ranging from 0% to 35%, depending on the individual's income level. This includes income from trading, staking, or lending cryptocurrencies
In conclusion, the Philippines is taking a balanced approach to cryptocurrency regulation, fostering innovation while prioritizing consumer protection. The country's regulators are actively working on developing a comprehensive regulatory framework for cryptocurrencies and stablecoins, which is expected to be unveiled in the second half of 2024.
