In case you are thinking of starting a virtual currency (VC) exchange or VC-related business in the Philippines, it would always be best to conduct a few intensive researches about the country’s rules and regulations. Adhering to regulations is one of the best things that you can do for a business; however, laws can get tricky if you are not familiar with it. Some of the most vital information is gathered in this article to guide and accompany you in registering your virtual currency exchange business in the country.
2014: How It Started
When virtual currencies started growing in the Philippines, Bangko Sentral ng Pilipinas (BSP) issued a public advisory on March of 2014 stating and warning the public that VCs are not yet being regulated by any governing authority in the country at the moment. The said statement urged our countrymen to familiarize themselves with some basic information about Virtual Currencies, which by then, was defined by BSP as “a form of unregulated digital money (which is not issued or guaranteed by a central bank) that allows the purchase of both virtual goods and real goods and services.”
What is Virtual Currency?
Under BSP Circular No. 944’s Definition of Terms, Virtual Currency can be referred to “any type of digital unit that is used as a medium of exchange or a form of digitally stored value generated by agreement within the community of VC users”. Basically, it is a digital currency that is generally used for online transactions. Cryptocurrencies such as Bitcoin, EOS, and the likes are a type of virtual money. Since community users create this currency online, it is not issued or backed by central banks or government authorities. VCs can also be exchanged to and from fiat/cash through different channels which will be explained further later on this post.
How does Virtual Currency Differ from Fiat Currency and E-Money?
Fiat Currency or cash is often called the real currency. This is what you call the coins and paper money (bills) issued and printed by the central bank of a country. With that being said, it means that fiat currency is fully backed by the government of a country and is acceptable as payment for public and private debts. E-Money, on the other hand, is a digital representation of fiat currency stored in digital wallets or e-wallets.
For example, a bill of Php100.00 (Philippine Peso), which is physical cash, is fiat, the Php100 stored in your electronic wallet (such as coins.ph, GCash, etc.) is E-Money, and Bitcoin is a type of virtual currency. A 100-peso-bill can be readily accepted anywhere in the Philippines when buying goods, paying for services, and many more, same with the E-Money of Php100 which can also be accepted as a “card payment” or can be withdrawn right away as cash. Meanwhile, Bitcoin, which is stored digitally, would still need to be converted first to Php, then transferred to a destination wallet or be withdrawn as cash through different mediums that are accepted in the country.
Once you have fully understood and grasp what virtual currency is, you would then start to wonder just how, when, and where we can convert these VCs into other forms of acceptable currencies. This need is what Virtual Currency Exchanges answer.
What is Virtual Currency Exchange?
Virtual Currency Exchange refers to “any entity that offers services or engages in activities that provide a facility for the conversion or exchange of fiat currency to VC or vice versa” as stated in BSP Circular No. 944’s Definition of Terms. These exchanges are like the digital banks of VCs that you can utilize whenever you need to transfer, convert, add, and cash out virtual currencies.
How Do You Process a Virtual Currency Exchange Registration in the Philippines?
A VC exchange company would need to secure a Certificate of Registration (COR) to operate as a remittance and transfer company. Registration is made up of a two-stage process. The first stage is a preparatory screening process for Bangko Sentral to decide if the applicant is qualified for registration while the second stage is where the eligible applicant will be requested to submit supporting papers. However, after the 2 stages, payments are needed to be made to complete the registration process and acquire the COR.
First Stage: Screening. A new applicant shall submit the following for evaluation:
- Application Letter
- Business Plan including target markets
- List of owners and/or controlling shareholders, directors, and principal officers.
Second Stage: Required Documents. If the applicant was not considered eligible during the first stage, he or she will receive a denial letter from the Bangko Sentral, otherwise, if the application has been approved, the following documents will be needed to complete the registration process:
- Business registration papers.
- For Corporation/Partnership: Incorporation papers duly authenticated by the Securities and Exchange Commission.
- For Single Proprietorship: A copy of the Certificate of Registration duly authenticated by the Department of Trade and Industry.
- For Cooperative: A proof of registration with the Cooperative Development Authority.
2. A copy of business registration and/or permit from the city or municipality where your business will be located and will be operating for the current period. The permit or registration papers should indicate the line of business of your registered company.
3. A Notarized Deed of Undertaking of the owner and members of the Board of Directors/partners, signed by the proprietor, partner/s, president and/or directors, whatever the case may be.
Note: A copy of Deed of Undertaking can be found in Appendix N-8-b-1 and Appendix N-8-b-2 of BSP’s Circular No. 942.
4. Proof of attendance of the proprietor/partners/directors/principal officers and other personnel directly involved in the company’s operations to the required Anti-Money Laundering Act seminar conducted by the AMLC, Bangko Sentral, or a Bangko Sentral accredited person, or for persons registered prior to the effectivity of this Circular, a certification of compliance with this paragraph executed by the President and Compliance Officer.
Note: All company entities that are directly involved in the money service business transactions are required to attend a Bangko Sentral or AMLC-accredited seminar on the requirements of the AMLA, as revised, especially on customer due diligence, reporting of covered and suspicious transactions, and record keeping before the start of company operations. Refresher training shall furthermore be conducted at least every two (2) years.
5. A signed sworn certification (either by the proprietor, managing partner, or president), that a Money Laundering and Terrorist Financing Prevention Program (MLPP) has been produced, adopted, and distributed to all of the company’s employees.
6. Clearance from NBI or its equivalent in foreign jurisdictions, of all the directors and principal officers involved.
7. Duly notarized certification from the owner, managing partner or president of the company, as to compliance with the required minimum capital under Subsection 4511N.2 of the Manual of Regulations for Non-Bank Financial Institutions.
Note: A Virtual Currency Exchange is considered a Remittance and Transfer Company (RTC). RTCs are classified under 6 categories with an assigned benchmark capital for each section, ranging from less than Php10 million up to at least Php50 million.
Additional documents required for RTCs only:
- Copy or copies of notarized tie-up agreement/s with RTC which shall be consolidated if originated or signed abroad.
- If there is an existing RTC or a counterparty based overseas, proof that the RTC or counterparty is licensed by the regulatory authority to engage in the remittance business and is subject to the anti-money laundering laws of the country is also needed.
- After submitting all the required documents, a Notice of Approval will be sent out and upon reception, you would then have to pay the corresponding fees. The one-time, non-refundable registration fee for RTCs also depends on the category your business is under and it can range from Php 20,000.00 to Php 100,000.00. Furthermore, a non-refundable additional registration fee of Php 1,000 shall be paid for every separate office other than the head office of your company.
- After payment, you would just have to wait for the issuance of your company’s BSP Certificate of Registration. Keep in mind that a Bangko Sentral-registered company shall start its operations within 3 months from the date of the issuance of Bangko Sentral’s Certificate of Registration (COR).
It is true that business registrations can be really tough, especially if your business is related to finances due to different laws and additional regulations in the country. However, know that you are not alone and that consulting a lawyer for business registrations is always a good decision as they can help make things easier for you and the company. If you need to contact a lawyer to handle your business’ registration, Yap and Associates Law Office offers expert and top-notch legal service and has a handful of lawyers to take care of the job for you.