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Philippines: Central Bank Issues Warning on Virtual Currencies

(Apr. 30, 2014) In March 2014, the Philippines’ Central Bank (Bangko Sentral ng Pilipinas, hereinafter BSP) issued a statement explaining the risks of using Bitcoin and other virtual currencies. (Press Release, BSP, Warning Advisory on Virtual Currencies (Mar. 6, 2014).)

The BSP’s statement indicated that because Bitcoin transactions have been taking place in the Philippines, it is deemed necessary to warn the public that these exchanges are not currently regulated by the BSP or any other Philippine authority. (Id.) The BSP added that at this time, there are no regulations aimed at protecting investors from losses stemming from a failure of a company that holds or exchanges virtual assets, whose value can be very unstable. (Id.)

The Central Bank indicated that before engaging in virtual currency transactions, the public may want to consider the risks involved, including the following:

• Failed platform risk: Because platforms for exchanging virtual currencies are not regulated, there is no legal recourse that protects investors from losses stemming from failed exchange platforms.

• Theft risk: After being acquired, virtual currencies may be stolen by hackers from devices where these assets are electronically stored. In fact, the BSP’s statement indicated that there have been reports from investors who claim to be victims of this type of theft.

• Loss risk: Virtual currencies may also be lost if their holders lose a password necessary to access the accounts in which these assets are kept, as there is no organization responsible for assisting investors in this scenario. Furthermore, there is no protection or recourse in cases in which the accounts of holders of virtual assets are subject to inaccurate or unauthorized charges.

• Value loss risk: The value of virtual assets has experienced great volatility, which carries the risk of depreciation.

• Legal risk: Virtual assets may be used in illicit transactions, including money laundering, which may be a cause for authorities to shut down exchange platforms where virtual accounts are kept, leaving their holders unable to have access to them. (Id.)

The BSP indicated that it will monitor virtual currencies, focusing on the possibility that these assets may be used as a vehicle to commit money laundering and other illicit transactions, and will take pertinent measures if necessary. (Id.)