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Email: mfl@mflegal.com.ph
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MFBR lawyers and associates care!

In light of the constantly changing social and economic landscape in the world due to COVID-19, everyone at Mallari Fiel Brillante Ronquillo has taken steps to make good our steadfast commitment to serve our clients and our communities.

To this end, we designed a new business model incorporating the traditional “brick and mortar” and “virtual” law offices. This new model is to achieve the continuity of rendering our legal and business consultancy services to clients and friends, and the immediate implementation of our crisis management and business transformation activities.

Thus, we’re glad to announce that for every fortnight, half of our team will be physically present at our offices from Monday thru Friday, 8:00am to 3:00pm. Clients and our friends can reach us through our office phones and online platforms (website, emails, Facebook, LinkedIn, Zoom, etc.). And to ensure the health and safety of our staff, they have the option to be housed in the Firm’s private residence or shuttled back and forth using the company’s private vehicle. Safety protocols are also observed at our offices.

Finally, our team has prepared a series of materials around the impact of COVID-19 and related considerations. Please take time to view our sample articles and research published in our website. A complete listing and discussion of these articles are available in our newsletter to be distributed to our esteemed clients.

Should you have questions, please reach out to our Office Manager, Argie Macawile, at +632 86953395, +63977 8502357; or email our Managing Partner, Atty. Rob Mallari, at mfl@mflegal.com.ph and rpmallari@mflegal.com.ph.

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Cryptocurrency Regulations in the Philippines (July 1, 2018).

Crytocurrency Law

The Law Firm of Mallari Fiel Brillante Ronquillo

The Bangko Sentral ng Pilipinas (BSP) and Securities and Exchange Commission (SEC) are the main regulators of virtual currency in the Philippines.

The virtual currency policies and regulations in the Philippines are discussed below.

Bangko Sentral ng Pilipinas

Section 3 of the New Central Bank Act provides that the BSP shall provide policy directions in the areas of money, banking, and credit. It shall have supervision over the operations of banks and exercise such regulatory powers as provided in this Act and other pertinent laws over the operations of finance companies and non-bank financial institutions performing quasi-banking functions, hereafter referred to as quasi-banks, and institutions performing similar functions.

At the onset, the BSP issued the Warning Advisory on Virtual Currencies dated 06 March 2014, wherein it defined a virtual currency as “a form of unregulated digital money, which is not issued or guaranteed by a central bank.”

Several years later, the BSP issued Circular No. 944, Series of 2017, dated 06 February 2017. This time, the BSP recognized that virtual currency (VC) systems have the potential to revolutionize delivery of financial services, particularly for payments and remittances, in view of their ability to provide faster and more economical transfer of funds, both domestically and internationally, and may further support financial inclusion.

With this development, the BSP issued guidelines for virtual currency exchanges.

In December 2017, the BSP issued the Advisory on the Use of Virtual Currencies (29 December 2017) encouraging existing and prospective virtual currency users to deal only with BSP-registered VC exchanges.

On 10 and 16 April 2018, the BSP issued advisories defining virtual currency as a type of digital currency created by a community of online users, stored in electronic wallets, and generally transacted online. The BSP reiterated its earlier stance that a virtual currency is not issued or guaranteed by central banks or government authorities. The advisories summarized the differences between a fiat, e-Money, and virtual currency.

Securities and Exchange Commission

Section 5 of the Securities and Regulation Commission provides:

“The XXX Commission shall have, among others, the following powers and functions:

(a) Have jurisdiction and supervision over all corporations, partnerships or associations who are the grantees of primary franchises and/or a license or a permit issued by the Government;

(b) Formulate policies and recommendations on issues concerning the securities market, advise Congress and other government agencies on all aspect of the securities market and propose legislation and amendments thereto; XXX”

In December 2017, the SEC issued the draft rules and regulations on crowdfunding. While said rules are not yet operative (as of this posting), the draft includes regulations on raising funds through Internet platforms (programs or applications accessible via the Internet or other similar electronic communication media through which a registered broker or a registered funding portal acts as an intermediary in a transaction involving the offer or sale of securities).

On 08 January 2018, the SEC issued the Advisory on Initial Coin Offerings. Virtual currency was defined as a digital representation of value issued and controlled by its developers and used and accepted among the members of a specific community or users. The SEC stated that some of the new virtual currencies follow the nature of a security, which is under the jurisdiction of the SEC and has to be registered and necessary disclosures have to be made for the protection of the investing public. This advisory, in turn, reinforces the possible applicability of the draft rules on crowdfunding to virtual currencies.

Further, under Section 3.1 of the Securities Regulation Code (SRC), “securities” are defined as shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture and evidenced by a certificate, contract, instruments, whether written or electronic in character. Under Section 3.1(b) in relation to Section 26.3.5(d) of the 2015 IRR of the SRC, a security includes an “investment contract”, which is defined as a contract, transaction or scheme (collectively “contract”) whereby a person invests his money in a common enterprise and is led to expect profits primarily from the efforts of others. An investment contract is presumed to exist whenever a person seeks to use the money or property of others on the promise of profits.

Thus, where the virtual currency offered is in the nature of a security, it should be registered pursuant to Section 8 and 12 of the SRC. Failure to comply with the registration and disclosure requirements may lead to criminal prosecution.

In April 2018, the SEC issued an advisory warning the public against investing their money in investment products offered by unregistered online investment entities. The SEC enumerated the schemes employed by the unregistered entities, which includes the claim that investors may invest their funds in Bitcoin and other cryptocurrencies to justify their earning capacity. The SEC advisory also warned the public of the rampant internet-based Bitcoin and cryptocurrency Ponzi schemes.

With the rising popularity of virtual currencies in the Philippines and globally, it is of utmost importance for persons dealing with virtual currencies to remain vigilant as to the regulations imposed by the government. It is always better to arm yourself with knowledge!

Atty. Stephanie Tible.

LINKS:

RA8799 The Securities Regulation Code

RA7653 The New Central Bank Act


Attorney Stephanie Tible shares some good news for the scientific community!

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The Law Firm of Mallari Fiel Brillante Ronquillo

Let’s support scientific and technological progress in the country! Republic Act No. 11035, otherwise known as the “Balik Scientist Act” was recently signed into law by President Duterte. The law aims to provide benefits, incentives, and privileges to science, innovation and technology experts of Filipino descent, to encourage and support their participation in strengthening the scientific and technological human resources of Philippine institutions and industry to accelerate the development of new or strategically important technologies that are vital to national development and progress.
The general benefits, incentives and privileges include: exemption from PRC licensing; accident and medical insurance; reimbursement of expenses for excess baggage allowance related to scientific project or activities; exemption from renouncing their oath of allegiance to the country where they took the oath; tax and duty exemption in the donation of equipment, instruments, and materials to the DOST; and tax and duty exemption in the importation of professional equipment, instruments, and materials. Term-specific benefits, incentives, and privileges are likewise provided under the law. The Balik Scientist Program shall be administered by the DOST, which shall coordinate with other departments, agencies, and bureaus, including government-owned and/or controlled corporations. The DOST shall also create and maintain a databank of the Balik Scientists who have availed of the program. We encourage Balik Scientists and curious readers alike to visit the DOST Balik Scientist Program website: http://bsp.dost.gov.ph, and the BaLinkBayan Overseas Filipinos’ One Stop Online Portal: http://balinkbayan.gov.ph/philanthro…/…/balik-scientist.html for more information on how to avail of the program. Attorney Stephanie Tible. http://bsp.dost.gov.ph/

You’ve heard the name, but what is it? Attorney Stephanie Tible answers some FAQs on blockchain.

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The Law Firm of Mallari Fiel Brillante Ronquillo

So, what is “blockchain”?

Well, simply put, it’s a distributed ledger, maintained on a peer-to-peer network, that uses cryptography to secure transactions. It may either be “permissionless/public”(i.e. anyone can join) or permissioned/private” (i.e. membership is restricted; participating parties must be known to each other).

Is it the same as Bitcoin?

No, it is not synonymous with the very popular (some might say notorious!) Bitcoin, which is a cryptocurrency. Blockchain is a distributed ledger that tracks and records transactions, which may involve assets other than cryptocurrencies.

How relevant is blockchain technology now?

Its importance is growing. Industries, such as finance, insurance, health, and legal, among others, are beginning to make use of it. Blockchain technology fosters trust, accountability, and transparency – factors that individuals and business entities consider in their daily transactions – while potentially decreasing transaction costs by doing away with a middleman, a centralized authority, or a trusted third party. This means that parties on a network may securely transact directly with each other.

In what ways can blockchain be used in the legal industry?

Well, traditionally, parties execute a written contract containing the terms and conditions of their agreement. With blockchain, however, parties may enter into what computer scientist Nick Szabo calls a “smart contract”, an agreement that contains self-executing clauses, and facilitates, verifies, or enforces the negotiation of a legal contract. This set-up may lessen the possibility of litigation since blockchain ensures that the participating parties must first accomplish their side of the obligation (e.g. Party A will only get his/her payment upon providing X service to Party B. If Party A reneges on his/her obligation, Party B’s funds revert to or remain with him/her.)

And then there’s Property Rights. Immutability is one of the important features of blockchain. Once a transaction is recorded therein, the data remains on the block and is shared among all participants. Thus, ownership of property and all transactions made in relation thereto may be recorded in the blockchain. Any changes made will be easily verifiable. So with respect to real property, disputes may be reduced. As to intellectual property rights, determining a certain product’s authenticity may be done by referring to the blockchain.

So, what does the Philippine government say about blockchain technology?

The Bangko Sentral ng Pilipinas (BSP) and the Securities and Exchange Commission (SEC) are the regulatory agencies whose stance holds relevance with respect to blockchain technology and cryptocurrencies. Said agencies seem to be open to new innovation and are in constant dialogue with key players. On the other hand, the Bureau of Internal Revenue (BIR) appears to be silent (at least as of this posting) on the specific tax consequences of blockchain transactions.

Whatever the situation now, there will undoubtedly be more to say on the subject in the months and years to come. Watch this space!

The Law Firm of Mallari Fiel Brillante Ronquillo


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