Five Things You Need To Know Before Starting A Crypto-Exchange Business In The Philippines
- You must have the BSP’s approval before you can register your company with the SEC.
For most companies, the usual requirement before legitimately operating a business is to simply secure a license with the Securities and Exchange Commission. However, the same route is not true for a crypto-exchange business, as it must first secure an endorsement from the Bangko Sentral ng Pilipinas.To get the BSP’s nod of approval (for SEC registration purposes), the company must pass the rigorous preliminary screening process for determining its eligibility for registration.At this point, the company must prepare, among others, a business plan detailing the company’s purpose, organizational structure, products/services to be offered, target market/network, operational workflow and capital requirements. The business plan must be clear enough to give BSP an idea of what you really intend to do. If your operations will include online transactions, you should also be ready to present your platform.
If you pass the preliminary screening, a letter of no objection will be issued in your favor, and you can proceed with your SEC application for registration.
- You must secure a BSP license before operating your crypto-exchange business.
Once you’re registered with the SEC, should you already start the crypto-exchange operations? Not yet.You must go back to BSP and comply with the second stage requirements, which are listed under the BSP Memorandum No. M-2017- 014. Basically, you will have to submit the SEC incorporation documents and business permit of the company. The company’s officers and directors must submit their personal data sheets and undertakings to comply with AML rules.
- You must meet the capitalization requirements.
The capitalization requirement may range from less than PHP10 million for small-scale operators to at least PHP50 million for large-scale operators. If your business includes e-money issuance, the requirement is PHP100 million.
- You must build a secure IT infrastructure.
The use of digital technology is faced with challenges, such as more sophisticated cyber-attack methods. Pursuant to BSP Circular No. 944, Series of 2017, a virtual currency exchange shall put in place adequate risk management and security control mechanisms to address, manage and mitigate technology risks associated with virtual currencies. An effective cyber security program should be established by a virtual currency exchange that provides wallet services. For simple virtual currency operations, installing up-to-date anti-malware solutions, conducting periodic back- ups and being aware of emerging risks and cyber-attacks may suffice.No matter the complexity of your operations, at the end of the day, the integrity and security of your platform must be maintained. Thus, you should seek competent IT professionals or service providers that will help in protecting your clients’ funds and data, and likewise your business.
- You must comply with anti-money laundering laws.
A virtual currency exchange must register with the Anti-Money Laundering Council within 30 days from the actual date of commencement of operations. Its principal directors, officers, or responsible personnel should attend a seminar on anti-money laundering and terrorist financing, and training for staff should be provided to enable them to detect illegal transactions and/or prevent the exchange from being used for fraudulent purposes. Policies must be implemented to ensure compliance with anti- money laundering regulations. The board of directors should likewise appoint a Compliance Officer who shall be responsible for overseeing the implementation of relevant policies and reporting covered and suspicious transactions.
And there you have it. If you are thinking of starting a crypto-exchange business in the Philippines, take careful note of the above. The world is changing fast, and it pays to keep abreast of all the latest rules and regulations. For consultation and assistance in setting up your business, email me at email@example.com.
Attorney Stephanie Anne V. Tible. July 11 2019
Photo by Clifford Photography @ Unsplash
In true Prohibition-Era fashion, the second MFBR Lex Speakeasy most certainly did not take place at the end of last month. No clients and friends partook of an impressive list of single-malt and blended whiskies; nor did they enjoy tasty
canapés expertly prepared by that good friend of the firm, Ms. Ingrid Connon.
Likewise, it goes without saying that no feverish game of poker (just for fun) occupied the tightly-packed inhabitants of our conference room. And if the talented JR duo sang hits both old and new to the delight of everyone not present, it was surely not in our offices.
That is why you will see no report of such goings on in social media. Not a jot. No pictures of one particular client, diligently working his way down the entire drinks menu while his business partner opined that it was the best party he had been to in his life. No Captain Of Industry happily ruining exquisite songs in various languages.
And no trainee barman who insisted on plonking slices of lemon and a dash of Coca Cola in everything from chocolate liqueur to red wine.
No sir. Never happened.
And anyone who says it did will not be invited to the next one.
Whether you are an employer or employee, when it comes to termination of employment it’s important to know your rights and obligations under the law. Let’s take a close look.
The right to security of tenure of an employee is granted under the 1987 Philippine Constitution and the Labor Code of the Philippines (both of which you can find in the Resources section on our Homepage). An employer cannot terminate an employee except for what are termed ‘Just Causes’ or ‘Authorized Causes’.
Article 297 of the Labor Code of the Philippines enumerates the Just Causes for terminating an employee as follows:
Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;
Gross and habitual neglect by the employee of his duties;
Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representatives; and
Other causes analogous to the foregoing.
Article 298 of the Labor Code of the Philippines, meanwhile, enumerates the Authorized Causes for terminating an employee as follows:
Installation of labor-saving devices;
Retrenchment to prevent losses; and
Closure or cessation of operation of the establishment.
An employer may also terminate an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees pursuant to Article 299 of the Labor Code of the Philippines.
Before terminating an employee, the employer must observe procedural due process. This varies depending on whether an employee is being terminated on the ground of just causes or on the ground of authorized causes.
The case of Unilever Philippines Inc. vs. Maria Ruby Rivera, G.R. No. 201701, 03 June 2013, provides the procedural due process to be observed before termination of an employee based on a just cause thus:
First written notice to the employee containing the specific causes or grounds for termination against them, and a directive that the employees are given the opportunity to submit their written explanation within a reasonable period. “Reasonable opportunity” under the Omnibus Rules means every kind of assistance that management must accord to the employees to enable them to prepare adequately for their defense. This should be construed as a period of at least five (5) calendar days from receipt of the notice to give the employees an opportunity to study the accusation against them, consult a union official or lawyer, gather data and evidence, and decide on the defenses they will raise against the complaint.
A hearing or conference during which the employee concerned, with the assistance of counsel if employee so desires, is given opportunity to respond to the charge, present his evidence or rebut evidence presented against him or her; and
A written notice of termination served on the employee indicating upon due consideration of all circumstance, grounds has been established to justify his or her termination.
However, it must be noted that a hearing or conference is not mandatory so long as the employee has been given ample opportunity to be heard. In the case of Felix B. Perez vs. Philippine Telegraph and Telephone Company, G.R. No. 152048, 07 April 2009, the Court held that, “A hearing means that a party should be given a chance to adduce his evidence to support his side of the case and that the evidence should be taken into account in the adjudication of the controversy. “To be heard” does not mean verbal argumentation alone inasmuch as one may be heard just as effectively through written explanations, submissions or pleadings. Therefore, while the phrase “ample opportunity to be heard” may in fact include an actual hearing, it is not limited to a formal hearing only. In other words, the existence of an actual, formal “trial-type” hearing, although preferred, is not absolutely necessary to satisfy the employee’s right to be heard.”
The procedural due process of terminating an employee based on authorized cause is provided in Article 298 of the Labor Code of the Philippines, to wit:
Written Notice to the employee at least one (1) month before the intended date of termination; and
Written Notice to the Department of Labor and Employment at least one (1) month before the intended date of termination;
An employee’s termination would be considered illegal if the employer did not observe the afore-stated due process.
I hope this information has been useful. Don’t forget, if you have a labor-related problem, we are here to help.
And we find solutions.
LINK : Labor Code of the Philippines
We live in a time when personal information can be freely transferred from one entity to another without any authorization whatsoever, causing consternation among many who use online services, particularly social media. Thus, in 2012, Republic Act No. 10173 or The Data Privacy Act of 2012 was passed, the purpose of which is “to protect the fundamental human right of privacy, of communication while ensuring free flow of information to promote innovation and growth.” (Sec. 2). This Act protects an individual’s personal data in information and communication systems in both the government and private sector.
In order to guide the public for compliance of the said provision, the National Privacy Commission (“NPC”), created five pillars of compliance and accountability to assist entities that are covered by the DPA. The first pillar is the appointment of Data Protection Officers.
Why Appoint a Data Protection Officer?
A Data Protection Officer (“DPO”), is a person assigned by the organization to ensure that the personal and sensitive information of the data subjects is protected and secured. As such, DPOs will be accountable for ensuring compliance by the Personal Information Controllers or Personal Information Processors with the DPA, its Implementing Rules and Regulations, related issuances of the NPC, and other applicable laws and regulations in relation to data privacy and security.
What are the General Qualifications to be a DPO?
The law does not expressly state the qualifications required to be a DPO; however for a smoother compliance, a DPO should possess specialized knowledge and demonstrate the reliability necessary for the performance of his or her duties and responsibilities. As such, they should have expertise in relevant privacy or data protection policies and practices. Likewise, they should have sufficient understanding of the processing operations being carried out by the controllers or processors.
Duties and Responsibilities of the DPO.
A DPO, among other things, shall monitor whether the collection of personal information or data subjects is in accordance with the DPA. For this purpose, he/she may:
Monitor the controller, or processor’s compliance with the DPA, its IRR, issuances by the NPC and other applicable laws and policies. As such, they may:
Collect information to identify the processing, operations, activities, measures, projects, programs, or systems of the Personal Information Controllers PIC) or Personal Information Processors (PIP), and maintain record thereof;
Analyze and check the compliance of processing activities, including the issuance of security clearances and compliance by the third-party service providers;
Inform, advise, and issue recommendations to the PIC, or PIP;
Ascertain renewal of accreditations or certifications necessary to maintain the required standards on personal data processing; and
Advise the Personal Information Controllers or Personal Information Processors as regards the necessity of executing a Data Sharing Agreement with third parties, and ensure its compliance with the law;
Ensure the conduct of Privacy Impact Assessments relative to activities, measures, projects, programs, or systems of the controllers, or processors;
Advise the controller, or processors regarding complaints and/or the exercise by data subjects of their rights such as request for information, clarifications, rectifications or deletion of personal data;
Ensure proper data breach and security incident management by the controllers or processors, including the latter’s preparation and submission to the NPC of reports and other documentation concerning security incidents or data breaches within prescribed period;
Inform and cultivate awareness on privacy and data protection within the organization of the controller or processor, including all relevant laws, rules and regulations and issuances of the NPC;
Advocate for development, review and/or revision of policies, guidelines, projects and or programs of the controllers, or processors, relating to privacy and data protection;
Serve as the contract person of the controller, or processors vis-à-vis data subjects, the NPC and other authorities in all matters concerning data privacy or security issues;
Perform other duties and tasks for the further interest of data privacy and security and uphold the rights of the data subjects.
In sum, the first step to compliance is appointing a qualified Data Protection Officer for the furtherance of protection and security of all kinds of information of its data subjects, whether personal or sensitive. The primary function of a DPO is to protect and secure all private information; any DPO failing to do so shall be accountable before the National Privacy Commission.
The second pillar of compliance is Assessment of Risk: Conducting a Privacy Impact Assessment, which I’ll discuss in the next article.
Atty. Matthew Mortega. Sept. 12, 2018.
It’s been a busy time recently for MFBR. Attorney Matthew Mortega represented us at the Data Privacy Summit last August 24, 2018 in Fort Bonifacio and has authored a fascinating article on that very subject which we will be adding to our blog very soon. Meanwhile, our Blockchain and Cryptocurrency specialist, Attorney Stephanie Tible, attended the Blockchain Summit in Singapore last August 28, 2018, along with our IT Associate, Strauss Santos.
Tax Implications of Cryptocurrencies in the Philippines (August 16 2018)
May a transaction involving virtual currencies be subject to tax?
As discussed in the previous article, while the Bangko Sentral ng Pilipinas (BSP) and Securities and Exchange Commission (SEC) have issued guidelines on cryptocurrencies, the Bureau of Internal Revenue has remained silent on the matter.
Yet, despite the lack of BIR guidelines specifically pertaining to cryptocurrencies, persons dealing with digital currencies like Bitcoin are not exactly exempt from taxes.
To explain this, let’s take a look at the nature of taxation.
In the case of Film Development Council of the Philippines vs. Colon Heritage Realty Corporation, G.R. 203754, 16 June 2015, the Supreme Court held that the power of taxation, being an essential and inherent attribute of sovereignty, belongs, as a matter of right, to every independent government, and needs no express conferment by the people before it can be exercised. It has even been described as the “power to destroy”. Such is the power of taxation that nobody can escape it, even after death!
Thus, it’s safe to say that spending or investing in Bitcoin may be subject to taxes. However, the tax treatment of a virtual currency transaction will depend on its usage.
Buying a dozen cheeseburgers using Bitcoin would entail income on the part of the burger chain, which may be subject to income tax (and if you eat all twelve yourself you might end up paying your doctor with Bitcoin, in which case a similar situation would arise!) Value Added Tax (VAT) may also be charged, as there was an exchange of goods.
Now, if the burger chain’s cook receives his or her wages in Bitcoin, their income may also be taxable (should their wages go beyond the compensation threshold under the TRAIN law).
Backtracking for a second, it’s also pertinent to ask how you, the purchaser, obtained the Bitcoins in the first place. Should you be a ‘miner’ then you’ll have earned them by solving a mathematical puzzle then adding a block to a blockchain.* If you subsequently sell or use the bitcoins you mined, the value received after deducting expenses may be treated as income.
On the other hand, if the Bitcoins you have were purchased from someone, this may be treated as an investment or property subject to capital gains tax.
As a final note, in the advisories issued in January and April 2018, the SEC advised that violators to the registration and disclosure requirements—where the virtual currencies offered are in the nature of a security—would be reported to the BIR so that the appropriate penalties and/or taxes can be assessed. This further solidifies the BIR’s authority on the taxation of cryptocurrencies. We’ll just have to wait for specific memoranda from the BIR.
We’ll keep you posted!
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