Financial Crime World

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The Philippines’ Digital Currency Boom: A Hotbed for Money Laundering Risks?

The Philippines has emerged as a hotbed for cryptocurrency adoption, driven by its tech-savvy population and growing internet penetration. In recent years, cryptocurrencies have grown significantly, with more Filipinos using digital currencies for various purposes, including remittances, investments, and online transactions.

Regulatory Efforts to Combat Money Laundering Risks

However, the rapid growth of the digital currency market has also raised concerns about money laundering risks in the country. The government has taken steps to regulate the industry, but experts warn that more needs to be done to prevent illicit activities from taking place.

Bangko Sentral ng Pilipinas (BSP) Regulations

In 2017, the BSP issued Circular No. 944, which recognized virtual currencies as a valid payment method and mandated virtual currency exchanges to register with the BSP and adhere to anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.

Securities and Exchange Commission (SEC) Regulations

In 2018, the SEC issued an advisory on initial coin offerings (ICOs) and cryptocurrency investments, warning investors about the risks involved and mandating that companies conducting ICOs register with the SEC and adhere to securities regulations.

Registered Virtual Asset Service Providers (VASPs) in the Philippines

As of January 31, 2023, there are 19 registered VASPs in the Philippines, including:

  • ABA Global Philippines, Inc.
  • Bloomsolutions, Inc.
  • Philippine Digital Asset Exchange (PDAX)

SEC Draft Rules for Public Review

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 newly enacted law granting the SEC more authority to enforce regulations, oversee the market, and perform inspections and surveillance.

Capital Gains Tax on Cryptocurrency Transactions

The Philippine government has also implemented a capital gains tax of up to 15 percent on cryptocurrency transactions to regulate and tax the growing digital asset market. This tax applies to profits made from the sale or exchange of cryptocurrencies and purchases made using cryptocurrencies.

Conclusion

While the Philippines’ digital currency market shows significant promise, it is crucial that the government addresses money laundering risks head-on. With more effective regulations and oversight, the country can establish itself as a safe and secure hub for cryptocurrency transactions and ensure that its citizens are protected from illicit activities.