By Nelly Favis-Villafuerte Today, regulators in many countries are getting more serious in their concern on whether or not to regulate the use and trade of cryptocurrencies.  In some countries, the use of cryptocurrency is banned, the operations of cryptocurrency exchanges are allowed but they have to be duly registered with the government. In the Philippines, our Bangko Sentral ng Pilipinas (BSP) issued BSP Circular No. 944 which was approved on February 6, 2017 and published in a newspaper of national circulation on February 6, 2017.  In essence, BSP Circular No. 944 requires a virtual currency exchange that deals in cryptocurrencies like bitcoin to obtain from the BSP a Certificate of Registration to operate as a remittance and transfer company.  As a Virtual Currency (VC) Exchange, the bitcoin (or other cryptocurrencies) shall conform to the guidelines issued by BSP on the maintenance of records and comply also with submission of requirements of BSP. From the following provision of Section 1 of BSP Circular No. 944, we see the concern of BSP for promulgating said circular:- “The Bangko Sentral does not intend to endorse any VC, such as bitcoin, as a currency since it is neither issued or guaranteed by a central bank nor backed by any commodity.  Rather, the BSP aims to regulate VCs when used for delivery of financial services, particularly, for payments and remittances, which have material impact on anti-money laundering (AML) and combating the financing of terrorism (CFT), consumer protection and financial stability.” (underscoring supplied) Let me share the definition of cryptocurrency for the benefit of those not familiar with this term: “Cryptocurrency is digital currency or virtual currency considered as alternative currencies designed as a medium of exchange using cryptology to secure transactions.”  To differentiate cryptocurrency with credit cards or physical money deposited in banks – cryptocurrency is decentralized and therefore central banks cannot control the supply of currency by printing units of fiat money.  Since cryptocurrency is a kind of digital cash system without a central entity (decentralized that is) its supply and value are controlled by the acts of their users as well as the protocols based on advanced mathematics and computer engineering principles that render them virtually impossible to break.  These highly complex protocols also hide the identities of cryptocurrency users.  And by the way, the transformation of money from the physical to the digital world is already unstoppable not only in US (but in other countries as well including the Philippines).  Stated otherwise, different economies in the world have already been shifting away from cash towards the so-called digital/electronic money supply including cryptocurrency which is a kind of digital currency.  As of November 6, 2017, there are over 1172 (and still growing) kinds of cryptocurrencies available over the market.  The most popular cryptocurrency in the market is bitcoin.  As of June, 2017, the total market capitalization of cryptocurrencies is bigger than 100 Billion US Dollars. Recently, the US Securities and Exchange Commission (SEC), the US Commodity Futures Trading Commission (CFTC), the US Internal Revenue Service and the US Treasury Department have made the following announcements (Reference: https://www.marketwatch.com/story/heres-how-the-us-and-the-world-are-regulating-bitcoin-and-cryptocurrency-2017-12-18 - from internet report by Francine McKenna, December 28, 2017): “Securities and Exchange Commission - SEC has not approved any exchange-traded products (such as ETFs) holding cryptocurrencies or other assets related to cryptocurrencies for listing or trading. SEC has not registered any initial coin offerings. “Commodity Futures Trading Commission (CFTC) - The CFTC has designated bitcoin as a commodity and announced that fraud and manipulation involving bitcoin traded in interstate commerce and the regulation of commodity futures tied directly to bitcoin is under its authority. “Internal Revenue Service - The IRS says bitcoin must be treated as property for tax purposes. That means a capital gain or loss should be recorded as if it were an exchange involving property. It should be treated like inventory if it is held for resale, and therefore an ordinary gain or loss recorded. If it is used as payment, it should be treated like currency, but must be converted, and its fair market value checked on an exchange. “US Treasury Department - In November the US Treasury Department’s inspector general said it planned to review FinCEN’s cryptocurrency practices as they relate to money laundering and terrorism financing risks. FinCEN’s Guidance FIN-2013-G001 declared that “virtual currency does not have legal tender status in any jurisdiction.”” (To be continued) Have a joyful day! (For comments/reactions please send to Ms. Villafuerte’s email: [email protected]).