Republic of the Philippines
HOUSE OF REPRESENTATIVES,
Quezon City, Metro Manila

EIGHTEENTH CONGRESS
Second Regular Session

House Bill No,__ 7864

Introduced by REP. JOEY SARTE SALCEDA

AN ACT
ESTABLISHING THE BASIC REGULATORY FRAMEWORK FOR
BLOCKCHAIN TECHNOLOGY IN THE PHILIPPINES,
PROVIDING FOR ITS USE IN GOVERNMENT SERVICE DELIVERY,
AND FOR OTHER PURPOSES

EXPLANATORY NOTE

Distributed ledger technology (DLT) or “blockchain” has immense potential as a records-
keeping and data management system for large and complex institutions, such as the Philippine
government. A blockchain is, in less complex terms, a time-stamped series of immutable
records of data that is managed by a cluster of computers not owned by any single entity. Each
of these blocks of data (i.e. block) is secured and linked to each other using cryptographic
principles (i.e. chain)

Since it is a distributed and immutable ledger, the information in it is open for anyone and
everyone to see. Hence, anything that is built on the blockchain is transparent and everyone
involved is accountable for their actions.

The blockchain is a simple yet inventive way of passing information from one terminal to
another in a fully automated and secure manner. One party to a transaction initiates the process
by creating a block. This block is verified by thousands, perhaps millions of computers
distributed around the net. The verified block is added to a chain, which is stored across the
net, creating not just a unique record, but a unique record with a unique history.

This secure feature is one of the reasons why blockchain has been used to generate
“cryptocurrency.” While cryptocurrency itself is controversial, the technology behind it clearly
has merits for secure data transactions. Falsifying a single record would mean falsifying the
entire chain in millions of instances. That is virtually impossible.

More importantly, it could ease the transaction costs in data transmission. Not only can the
blockchain transfer and store money and other pieces of vital information, but it can also
replace all processes and business models that rely on charging a small fee for a transaction.
Or any other transaction between two parties. This could potentially save consumers, and even
the government, millions.


The most promising applications for blockchain appear to be in the financial sector, with
implications for the way stock exchanges work, loans are bundled, and insurances contracted.
For regulators, the promise of blockchain is that it could boost efforts on Anti-money
laundering (AML) and know your customer (KYC) practices. These areas have a strong
potential for being adapted to the blockchain. Presently, financial institutions must perform a
labor-intensive multi-step process for each new customer. KYC costs could be reduced through
cross-institution client verification and at the same time increase monitoring and analysis
effectiveness.

Blockchain also has immense potential for the delivery of basic social services. Currently, most
social services in the country are linked with residency, such that one has to go where they are
registered to be able to avail of social benefits. Under DLT, these social benefits could become
more portable, such that the beneficiary can access these services anywhere in the country that
has access to the DLT for the specific service.

To reap these immense potential benefits, this Act aims to set the basic regulatory framework
for blockchain technology.

Specifically, this Act:

1, Identifies the permitted and restricted uses of blockchain technology;
._ Establishes the Bangko Sentral ng Pilipinas (BSP) as the policymaking and regulatory
agency for the use of blockchain in the financial sector;

Encourages the use of blockchain in the broader economy;

. Encourages the use of blockchain technology in human development programs;

. Releases blockchain use from overregulation by local governments; and

.. Explores the use of blockchain in the National ID system.

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‘The potential benefits of blockchain technology when employed in governance and in the larger
economy have not yet been fully explored. This Act aims to provide the government with the
tools needed to utilize this promising technological development,

In view of the foregoing, the approval of this bill is urgently sought.

JOEY SARTE SALCEDA


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

EIGHTEENTH CONGRESS
Second Regular Session

House Bill No,__7864
Introduced by REP. JOEY SARTE SALCEDA

AN ACT
ESTABLISHING THE BASIC REGULATORY FRAMEWORK FOR
BLOCKCHAIN TECHNOLOGY IN THE PHILIPPINES,
PROVIDING FOR ITS USE IN GOVERNMENT SERVICE DELIVERY,
AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:

SECTION 1. Short title. This Act may be cited as the “Blockchain Technology
Development Act.”

SEC. 2. Definitions of terms. ~ As used in this Act:

(a) “Blockchain” or “Distributed Ledger” means an electronic record created by the
use of a decentralized method by multiple parties to verify and store a digital record of
transactions which is secured by the use of a cryptographic hash of previous transaction
information.

(b) “Blockchain technology” means computer software or hardware or collections of
computer software or hardware, or both, that utilize or enable a blockchain.

(c) “Cryptographic hash” means a mathematical algorithm which performs a one-way
conversion of input data into output data of a specified size to verify the integrity of the data;

(d) “Electronic” means relating to technology having electrical, digital, magnetic,
wireless, optical, electromagnetic, or similar capabilities;

(e) “Electronic record” means a record created, generated, sent, communicated,
received, or stored by electronic means, including a blockchain or a smart contract;

(f) “Record” means information that is inscribed on a tangible medium or that is stored
in an electronic or other medium and is retrievable in perceivable form; and

(g) “Smart contract” means a contract stored as an electronic record which is verified
by the use of a blockchain.

SEC. 3. Permitted use of blockchain. —

(a) A smart contract, record, or signature may not be denied legal effect or
enforceability solely because a blockchain was used to create, store, or verify the smart
contract, record, or signature.

(b) In a proceeding, evidence of a smart contract, record, or signature must not be
excluded solely because a blockchain was used to create, store, or verify the smart contract,
record, or signature.


(c) If a law requires a record to be in writing, submission of a blockchain which
electronically contains the record satisfies the law.

(d) If a law requires a signature, submission of a blockchain which electronically
contains the signature or verifies the intent of a person to provide the signature satisfies the
law.

The Department of Justice (DOJ) and the Department of Information and
Communication Technology (DICT), in consultation with relevant stakeholders, shall issue the
rules and regulations necessary to implement this Section.

SEC. 4. Limitations to the use of blockchain. —

(a) If parties have agreed to conduct a transaction by use of a blockchain and a law
requires that a contract or other record relating to the transaction be in writing, the legal effect,
validity, or enforceability of the contract or other record may be denied if the blockchain
containing an electronic record of the transaction is not in a form that is capable of being
retained and accurately reproduced for later reference by all parties or other persons who are
entitled to retain the contract or other record.

(b) b) Except as otherwise provided in subsection (f) of this Section, if a law other than
this Act requires a record to be posted or displayed in a certain manner, to be sent,
communicated, or transmitted by a specified method, or to contain information that is formatted
in a certain matter, the use of a blockchain to post, display, send, communicate, transmit, or
store such a record does not satisfy the requirement of the other law.

(c) If a person inhibits the ability of another person to store or retrieve information
contained in a blockchain, such information is not enforceable by the person who inhibited the
storage or retrieval.

(d) Regardless of whether a smart contract was used to establish the relationship
between the parties to an agreement, a requirement that a notice or an acknowledgment or other
response to a notice be in writing is not satisfied by providing or delivering the notice or
recording an acknowledgment or other response to the notice by the use of a blockchain if the
notice is a notice of: (1) the cancellation or termination of service by a public utility; (2)
default, acceleration, repossession, foreclosure, or eviction, or the right to cure, under a credit
agreement secured by or a rental agreement for, a primary residence of a natural person; (3)
the cancellation or termination of a policy of health insurance, benefits received under a policy
of health insurance, or benefits received under a policy of life insurance, excluding annuities;
or (4) the recall ofa product, or material failure of a product, that risks endangering the health
or safety of a person.

(©) A requirement that a document be in writing is not satisfied by the use of a
blockchain if the document is required to accompany any transportation or handling of
hazardous materials, pesticides, or other toxic or dangerous materials.

(f) The requirements of this Section may not be varied by agreement, except that: (1)
to the extent a law other than this Act requires that a contract or other record relating to a
transaction be in writing, but permits that requirement to be varied by agreement, the provisions
of subsection (a) concerning the denial of legal effect, validity, or enforceability of the contract
or other record relating to the transaction may also be varied by agreement; and (2) a
requirement under a law other than this Act to send, communicate, or transmit a record by mail,
may be varied by agreement to the extent permitted by the other law.

The Department of Justice (DOJ) and the Department of Information and
Communication Technology (DICT), in consultation with relevant stakeholders, shall issue the
rules and regulations necessary to implement this Section.


SEC. 5. Blockchain regulation in financial activities. ~ The Bangko Sentral ng Pilipinas
(BSP) shall have original and primary policymaking powers and regulatory oversight on the
use of blockchain in financial transactions and activities.

The BSP shall review the potential application of blockchain technology to the
provision of banking, and consider areas for potential adoption and any necessary regulatory
changes in the Philippines. On or before June 30, 2021, the BSP shall submit to Congress a
report of its findings and recommendations.

SEC. 6. Blockchain and financial technology promotion. ~ The National Economic and
Development Authority (NEDA) shall incorporate into one or more of its economic
development reports and support programs, events, and activities the following topics:

(a) opportunities to promote blockchain technology and financial technology-related
economic development in the private sector, including in the areas of banking, insurance, retail
and service businesses, and cryptocurrency;

(b) legal and regulatory mechanisms that enable and promote the adoption of
blockchain technology and financial technology; and

(©) educational and workforce training opportunities in blockchain technology,
financial technology, and related areas.

SEC. 7. Use of blockchain technology in human development programs. ~ The
Philippine Institute for Development Studies (PIDS) shall conduct a study on the use of
blockchain technology for more efficient delivery of government services, including social
welfare programs and benefits.

The PIDS shall apprise Congress of its efforts to complete this study on or before June
30, 2021.

SEC. 8. Restrictions on overregulation by local governments. - A unit of local
government shall not:

(a) impose any tax or fee on the use of a blockchain or smart contract by any person or
entity;

(b) require any person or entity to obtain from the unit of local government any
certificate, license, or permit to use a blockchain or smart contract; or

(c) impose any other requirement relating to the use of a blockchain or smart contract
by any person or entity.

Nothing in this Section prohibits a unit of local government from using a blockchain or
smart contract in the performance of its powers or duties in a manner not inconsistent with the
provisions of this Act.

SEC. 9. Use of blockchain in the National ID system. ~ The Philippine Statistics
Authority (PSA) is authorized to conduct, or cause the conduct through another agency or
organization, of a study on the use of blockchain in implementing Republic Act No. 11055,
otherwise known as the Philippine Identification System Act.

The PSA shall apprise Congress of its efforts to complete this study on or before June
30, 2021.


SEC. 10. Separability Clause. — If any part or provision of this Act is held invalid or
unconstitutional, the remaining parts or provisions not affected shall remain in full force and
effect.

SEC. 11. Repealing Clause. — All laws, decrees, orders, rules, and regulations
inconsistent with the provisions of this Decree are hereby repealed or modified accordingly.

SEC. 12. Effectivity. — This Act shall take effect fifteen (15) days after its publication
in the Official Gazette or in any newspaper of general circulation.

Approved,