By Atty. Jun de Zuñiga

“Legal tender" is that which a debtor may compel a creditor to accept in payment of a debt. It is such currency which in a given jurisdiction can be used for the payment of debts, in public and private, and which cannot be refused by the creditor. It is also that currency which has been made suitable by law for the purpose of a tender of the payment of debts. In consonance with these tenets, all forms of currency notes issued by the Bangko Sentral must be accepted when offered as payment of debts, public or private (Banking Laws of the Philippines, Vol. I, BSP, p. 231).

Under its charter, the Bangko Sentral was given the sole power and authority to issue currency within the territory of the Philippines, and no other person or entity, public or private, may put into circulation notes, coins or any other object or document which, in the opinion of the Monetary Board, might circulate as currency. Accordingly, any purported currency issued in the Philippines by any entity other than the Bangko Sentral should be considered unauthorized and counterfeit, and should be subject to criminal sanctions.

Not only did the law grant the Bangko Sentral exclusive authority to issue currency in the Philippines, it also vested such currency with legal tender power by providing that "all notes and coins issued by the Bangko Sentral shall be fully guaranteed by the Government of the Republic of the Philippines and shall be legal tender in the Philippines for all debts, both public and private."

Would a virtual currency, such as bitcoin, then fall into such definition of currency under the Bangko Sentral charter?  To a certain extent, bitcoin has developed a patronage in the Philippines with transactions estimated at around 5 to 6 million US dollars per month.

Under Circular No. 944 issued by the Bangko Sentral in 2017, a virtual currency, or VC, such as bitcoin, was defined to refer to any type of digital unit that is used as a medium of exchange or a form of digitally stored value created by agreement within the community of VC users. The key phrases here are that VCs or bitcoins are intended more as a "medium of exchange" and that their usage is more by agreement among the community of users, meaning that there is no compulsion for the counterparties to accept  the VCs as  a  payment mechanism. In such sense, bitcoins do not purport to be currency nor to be classified as legal tender.

Conformably with the above, Circular No. 944 states that VCs are not issued or guaranteed by any jurisdiction and do not have any legal tender status. As a caveat, said Circular further provided that the Bangko Sentral does not intend to endorse any VC, such as bitcoin, as a currency since it is neither issued nor guaranteed by a central bank nor backed by any commodity.  In December last year, the US SEC Chairman also issued an advisory that investors in such products should exercise extreme caution and be wary that the investment may be lost.  This is similar to the advisory issued by the Singapore central bank also in December last year.  China and Indonesia, however, went one step further by disallowing bitcoins in their respective jurisdictions.

The above comments are the personal views of the writer. His email address is [email protected]