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Can I trade Bitcoin and cryptocurrency in the Philippines?
Introduction to Bitcoin and crypto trading in the Philippines
The Philippines stayed at number 29 on the Coincub rankings for Q3 2022. The country has been a cryptocurrency user with an enthusiastic institutional outlook for all things blockchain. The Philippines’ Central Bank allows the use of crypto exchanges as remittance and transfer companies but crypto ownership figures are only average and the government has yet to formulate a crypto strategy. Tax on crypto gains is low and there are a high number of blockchain organizations, but overall the Philippines only just makes it into the top thirty.
The latest news, perhaps exacerbated by the FTX collapse, indicates that the Central Bank of the Philippines, Bangko Sentral ng Pilipinas, will cease to accept crypto license applications for three years. Certainly, a move to dampen down growth. The central bank is a key regulator of crypto in the Philippines and thus any new Virtual Asset Service Provider VASP is going to have to wait for licensing approval for a lengthy time – but things can always change as the announcement states: ‘subject to re-assessment’.
Spending Bitcoin and cryptocurrency trading in the Philippines
Despite the rise of the crypto economy in the Philippines, specialist outlets that accept crypto are thin on the ground. Some of the specific products and services you could spend your hard-earned/mined/traded bitcoin on include property, cupcakes, cured beef, photography, and watches. On the other hand, you could just turn your cryptocurrency into normal money and splash the cash.
Crypto trading laws in the Philippines
Cryptocurrency comes under the jurisdiction of the Securities and Exchange Commission and the Central Bank (BSP). The former is currently drafting new rules for virtual currencies and initial coin offerings (ICOs) and investigates organizations providing crypto services. The latter has regulatory powers over the financial service providers; especially transfer agents and foreign exchanges.
Bitcoin tax on crypto trading in the Philippines
The Philippines’ Bureau of Internal Revenue (BIR) and the Department of Finance (DOF) have both recently released statements on taxing cryptocurrencies. Essentially, anyone making gains from trading cryptocurrency is likely to be taxed on earnings from within the Philippines and abroad. As with many countries, your gains will be taxed only if you sell or exchange your coins to make a profit. Tax also applies to winnings on ‘playing to earn’ games. Capital gains tax may also apply to speculative gains even if you’re not a regular trader. The Philippines requires regular tax returns, so whether you’re making profits or not, you have to file your returns.
Crypto gains are taxable and on a sliding scale of earnings. If you’re a professional trader you could be subject to VAT if your gross earnings exceed PHP 3 million pesos. You may also be subject to something called a percentage tax. In all these cases, you need to get advice on where you stand as a potential taxpayer before thinking of tax relief. Also, gifting crypto is likely to be taxed on the gain you made from acquiring it and gifting it. Permanent residents of the Philippines realizing gains from crypto trading or mining are subject to standard income tax, but if you permanently move residency to another country you’ll pay its prevailing tax laws.
Bitcoin mining in the Philippines
Thinking of mining crypto in the Philippines? It’s a highly technical and expensive activity at the best of times. In the Philippines, your mining gains are also subject to income tax – but only when you realize them. So if you do mine a fortune (and still have money to spare after your electricity bill) your gains will be subject to income tax as and when you sell or exchange them. An activity strictly for the very few!
Cryptocurrencies such as bitcoin are not excluded from diversified investment portfolios. However, there have been some well-publicized frauds, and many long-term personal retirement funds would not recommend it for retirement planning due to price volatility. Those that are able to offer them will seek correspondingly higher fees and are more likely to cater to high-net-worth individuals.
Financial outlook on Bitcoin and the crypto economy in the Philippines
Trying to keep the lid on the vast growth of crypto transactions has seen the Philippines initiate legislation requiring all virtual currency exchanges to register with the Anti-Money Laundering Council (AMLC). Centering on services outside of banking, these requirements are aimed at remittance and transfer companies, as well as moneychangers and foreign exchange dealers who are required to file timely reports for covered transactions. The fintech industry in the Philippines is very much in a state of evolution, with numerous crypto platforms active. Overall the financial sector is still looking for strategic guidance. The Philippines is considering the idea of a well-regulated and controlled national crypto exchange.
The Philippines and Defi
While the Philippines is one of the world’s fastest-growing crypto economies, Defi is a step too far at present. The government’s current focus is regulating the existing situation. Defi is still viewed as lying outside of the requirements of the mainstream economy. Any Defi digital revolution in the Philippines will need the cooperation of banks, governments, and financial services.
Crypto regulation in Philippines
The Philippines’ active crypto economy has a dark side. The country has a reputation as a site of fraud and money laundering. This is something the government is keen to eradicate.
Under the auspices of the Manual of Regulations for Non-Banking Financial Institutions (MORNBFI), virtual exchanges have to register with the Anti-Money Laundering Council (AMLC). Exchanges are also subject to the AMLA’s know-your-customer and record-keeping requirements. Remember, some exchanges carry insurance against loss, but it is up to individuals to find out how much protection a given exchange offers.
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