By Arra B. Francia, September 3 2018; Business World
Image Credit to Securities and Exchange Commission of the Philippines
THE SECURITIES and Exchange Commission (SEC) will be releasing a draft of new guidelines on virtual currency exchanges (VCE) this September, as it rushes to regulate the number of companies seeking to operate as a trading platform for virtual currencies (VC) in the country.
SEC Commissioner Ephyro Luis B. Amatong said the release of the draft rules this month will allow them to come out with the final regulations by the end of the year.
“We will put out a draft rule for the virtual currency exchanges hopefully within the first half of September,” Mr. Amatong told reporters after the commission’s en banc meeting on Thursday last week.
Mr. Amatong said they are in talks with the Bangko Sentral ng Pilipinas (BSP) for joint cooperative oversight over the exchanges.
Virtual currencies are defined by the BSP as a “type of digital currency created by a community of online users, stored in electronic wallets, and generally transacted online.” These are not issued or guaranteed by central banks or government authorities. Meanwhile, virtual currency exchanges are companies or businesses that exchange VCs into fiat currency (and vice versa).
The BSP implemented a formal regulatory framework for VCEs through Circular No. 944 in February last year, where the exchanges are required to register with the local central bank as remittance and transfer companies. Here, people can exchange VCs into Philippine money, which can then facilitate payments and remittances.
There has since been five VCEs approved by the BSP as of July, namely Virtual Currency Philippines, Inc., ETranss, Rebittance, Inc., Betur, Inc. (better known as Coins.ph) and BloomSolutions.
However, Mr. Amatong noted the rules set by the BSP do not specify how VCEs can operate as trading platforms.
“Yung VCE na ni-license nila, parang money changer lang yun, yung crypto to fiat currency (The VCEs that they licensed are like money changers, from cryptocurrency to fiat currency). But many of the VCEs, all of the VCEs are applying to allow them to act as trading platforms. So pagpasok ngtrading platforms, may concern ang SEC na pag-usapan na with BSP (When the trading platforms come in, this is a concern of SEC that we will discuss with BSP), we will have a joint cooperative oversight,” Mr. Amatong said.
The commission is taking the cue from VCE regulations in other countries such as the United States, Australia, and Switzerland.
The new guidelines on VCEs aim to promote investor protection and allow small to medium enterprises (SMEs) to have alternative ways to raise capital.
“We want to create an environment where investors can feel more or less safe in investing in what are essentially securities that have a digital form… Instead of paper or securities that are housed within PDTC (Philippine Depository & Trust Corp.), the depository they’re being proposed to be housed on a blockchain,” Mr. Amatong explained.
The release of new guidelines for VCEs will coincide with the commission’s release of rules for initial coin offerings and crowdfunding, which Mr. Amatong will benefit SMEs in raising funds.
“Previously you had to go through all of the infrastructure of the PSE (Philippine Stock Exchange) or a PDEx (Philippine Dealing & Exchange Corp.), a traditional stock in order to raise the funds but what the fintech promises is you can achieve that through technology at a lower cost,” Mr. Amatong said.
“So kahit maliit na kompanya ka, may paraan ka na magpalabas ng, maghanap ng investors (Even if you’re a small company, you can have a way to look for investors) without going through that whole process,” he added.