With the phenomenal emergence of digital currency Bitcoin – and the recent controversial closure of some Bitcoin exchanges such as Japan-based Mt. Gox – the Bangko Sentral ng Pilipinas (BSP) has issued an advisory on the use of the virtual currency.
The country’s monetary authority released on Thursday, March 6, a press release, which took a strong stance against the trading of the digital currency in the country.
“The public is hereby warned that such exchanges are not regulated by the BSP or by any regulatory authority in the country at this time. Thus, there are no existing regulations which would specifically protect consumers from financial losses if an organization that exchanges or holds virtual currencies fails or goes out of business,” the BSP said.
The government agency stressed that there is no assurance that the value of Bitcoin or any virtual currency would be stable. In fact, its value can be highly volatile, it noted.
The BSP said it will be closely monitoring developments on the virtual currencies particularly on their possible use for money laundering and other illegal purposes, and will adopt appropriate measures as needed.
The advisory from the BSP comes at a time when Bitcoin trading platforms have sprouted online, a handful of which are operated in the Philippines. On Saturday, March 8, a Filipino-owned company, mbtc.ph, joined the growing list of locally operated Bitcoin exchange platforms.
In the meantime, the BSP said the public should familiarize themselves with some basic information on the digital currencies. It issued the following information:
A virtual currency is a form of unregulated digital money, meaning it is not issued or guaranteed by a central bank. It allows purchase of both virtual goods (such as in online gaming environments and social network) and real goods and services (such as in retailers, restaurants and other establishments). Unlike electronic money, which is backed by cash for 100 percent of its stored value, virtual currencies are not backed by any commodity like cash, gold or silver. Rather, they are merely valued subjectively according to one’s ability to exchange them for goods.
1. You can lose your money through a virtual currency exchange – Exchange platforms are unregulated. If a virtual currency exchange loses or fails, there is no legal protection that covers you for losses arising from any funds you may hold on the said exchange. At present, there have already been a number of cases where virtual currency exchange platforms have gone out of business or have failed.
2. Virtual currencies in your digital wallet can get stolen – When buying virtual currencies, the same are stored in a “digital wallet,” on a computer, laptop, PC tablet or smart phone. This digital wallet makes use of public and private keys or passwords that allow you to secure your wallet. Still, there have been a number of reported cases whereby consumers lost large amount of virtual currencies from their wallets through hacking. Further, since virtual currencies do not have central organizations that hold and re-issue keys or passwords, losing the key or password to your digital wallet would mean losing your virtual currency forever.
3. You are not protected when using virtual currencies for payment – Payments made through virtual currencies like Bitcoin are immediate, direct and non-reversible. Further, since the use of virtual currencies is not regulated, there are no existing regulations to protect you in case of unauthorized or incorrect debits made from your digital wallet.
4. The value of your virtual currencies cannot be guaranteed and can change quickly – The value of virtual currencies has shown several sharp increases for the past year, and several sharp decreases as well. If you buy a virtual currency today, it is quite possible for its value to drop sharply and permanently the next day.
5. Virtual currencies may be used for money laundering and other illicit activities – Virtual currencies provide consumers with high degree of anonymity and therefore may be used for money laundering and other illicit activities. This illegal use can affect you, as law enforcement agencies may decide to close exchange platforms and prevent you from accessing funds that the platform may be holding for you.
nd prevent you from accessing funds that the platform may be holding for you,” the BSP said.