Bill recognizing digital assets for financial inclusion filed

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Sen. Imee Marcos is seeking the immediate passage of her bill, which seeks to recognize the digital assets and institutional rules regarding them to allow Filipinos to enjoy its advantages and promote financial inclusion.

Marcos, in filing Senate Bill 184 or the proposed “Act Recognizing Digital Assets, Requiring the Registration of Digital Assets, and Their Operators,” cite Article 2, Section 20 of the 1987 Constitution provides that “the State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investments.”

“The recognition and standardization of the rules regarding the operation of digital assets will allow the country to enjoy its advantages. One advantage is the ease in which transactions can be done. Digital assets are traded in the Internet, which minimizes transaction costs. The accessibility, ease, and low transaction cost makes It an attractive vehicle for remittances, both local and international,” Marcos said in her bill.

She said the same traits also make it easier to make online transactions In the electronic commerce industry. 

Digital assets are also a possible alternative In addressing the lack of financial inclusion, the senator said, citing the 2019 Financial Inclusion Survey that showed 78 percent of Filipinos do not own a bank account.

“The absence of access to financial institutions result in most Filipinos not having a credit history, preventing most Filipinos from availing a bank loan. The use of digital assets can allow Filipinos to accumulate a transaction history, which will improve the financial inclusion of the country,” Marcos said.

In addition, it also improves the geographic reach of the financial system among those living in far-flung areas, she said.

The measure defines digital assets (previously referred to as digital currencies) refer to assets represented in a digital form with their value being determined by supply and demand and has monetary characteristics. 

Currently, the Bangko Sentral ng Pilipinas regulates transactions related to digital assets through BSP Circular No. 942, 944 and 1108. 

The BSP Charter, however, as defined by Republic Act No. 7653, also known as the “The New Central Bank Act” as amended by RA 11211, does not mention electronic, virtual, or digital representations of money. 

Marcos said the absence of digital assets is important in the context of the recommendation made by the Financial Action Task Force (FATF) last October 2018 on the use of the term “virtual asset” “to refer to digital representations of value that can be digitally traded or transferred and can be used for payment or investment purposes, including digital representations of value that function as a medium of exchange, a unit of account, and/or a store of value.”

The FATF also emphasized the distinction between virtual assets and fiat currency. While the FATF recognize that virtual assets do not include digital representations of fiat currency, the limitation in the mandate of the BSP creates a need to further define the regulatory authority of the BSP to Include e-money, the bill stated.

The value of virtual assets are solely based on the demand and supply, which makes their value volatile. As such, they differ from fiat currency, which is fully backed by the government of a country and is acceptable as a payment for public and private transactions. 

The bill also stated digital assets are also distinct from electronic money, which is just the digital representation of flat currency and is recognized as legal tender. Most virtual assets are programmed to behave like cash, with sophisticated encryption methods resulting in anonymity, as the user only needs to have a private digital key In order to transact in the system. 

“Virtual assets suffer from several problems. The combination of lack of central authority, lack of legislation and the degree of anonymity associated with virtual asset transactions make them a potential vehicle for fraud and illicit transactions. As such, there is a sentiment around the world for virtual assets to be recognized and regulated in order to facilitate acceptability and use while minimizing the dangers and risk associated with them,” it said.

Singapore regulates the virtual assets through the Financial Services and Markets Bill, which was passed in 2022. The Monetary Authority of Singapore is now tasked with ensuring that virtual assets were not used in money laundering and financing terror activities. Thailand continues to regulate virtual asset exchanges and virtual asset businesses through the “Emergency Decree on Digital Asset Businesses,” which was passed in 2018. 

In the Philippines, the Securities and Exchange Commission regulates virtual asset offerings as securities. 

Given the situation described above, the bill aims to clarify and institutionalize the rules regarding digital assets. 

“The bill aims to recognize but not regulate digital assets by defining what digital assets are and standardizing the process for the licensing and operation of e-money, virtual asset exchanges, and virtual asset businesses,” Marcos said.


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