EIGHTEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
)
SENATE
S.B. No. 1041
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Introduced by SENATOR IMEE R. MARCOS
AN ACT RECOGNIZING DIGITAL ASSETS, REQUIRING THE REGISTRATION 
OF DIGITAL ASSET ENTERPRISES, THEIR OPERATORS, AND FOR OTHER
PURPOSES
EXPLANATORY NOTE
Article 2, Section 20 of the 1987 Constitution provides that "the State 
recognizes the indispensable role o f the private sector, encourages private enterprise, 
and provides incentives to needed investmentd'.
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 Sentra! ng Pilipinas (BSP) regulates transactions related 
to digital assets through BSP Circular No. 942 and 944. The BSP Charter, however, as 
defined by RA No. 7653, also known as the "The New Central Bank Act" as amended 
by RA No. 11211, does not mention electronic, virtual, or digital representations of 
money. Section 3 provides that "the Bangko S e n tr a !p r o v id e  policy directions in 
the area of money, banking, and credit." Section 49 defines "currency" as all Philippine 
notes and coins issued or in circulation. This distinction 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 further emphasizes 
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.
Virtual assets, as defined earlier, is a subset of digital assets issued by 
developers and stored in electronic wallets for online transactions. They are usually 
controlled by a decentralized network of users and is not subject to the control and 
guarantee of national governments or a central bank. 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. They are also 
distinct from electronic money, which is just the digital representation of fiat 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. Virtual 
assets, in particular, is associated with the trade of illegal material in the "dark web" 
through the now defunct online black market Silk Road. Before its shutdown in 2013, 
Silk Road was able to generate an equivalent of $1.2 billion of revenue, all in virtual 
assets. In addition, there are also concerns regarding money laundering using virtual 
assets. Liberty Reserve, a Costa Rica-based monetary transmitter, used virtual 
currencies to launder $6 billion of criminal proceeds before its shutdown in 2013.
There is an emerging 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. As of 2019, our ASEAN neighbors are 
currently in the process of establishing the framework for the operation of virtual asset 
exchanges and virtual asset business. Singapore already recognizes but not regulate 
virtual assets, allowing virtual payment tokens under the "Payment Services Act". 
Thailand regulates virtual asset exchanges and virtual asset businesses through the 
"Emergency Decree on Digital Asset Businesses". In the country, the Securities and 
Exchange Commission (SEC) regulates virtual asset offerings as securities.
The value of virtual asset transactions in the Philippines is growing. Looking at 
the BSP data, the Philippines recorded $390.37 million worth of transactions last 2018, 
from $189.18 million last 2017. Fiat-to-virtual currency conversions totaled $208.27 
million in 2018, while virtual currency-to-fiat conversions totaled $173.33 million. 
International remittances accounted for the remaining $8.77 million. As of June 24, 
2019, there are 48 virtual currency exchanges operating in the Philippines. As of the 
48, 11 of them are registered under the Bangko Sentral ng Pilipinas (BSP) under 
Circular No. 944, which was issued last February 7, 2017. The remaining 37 virtual 
currency exchanges were licensed by the Cagayan Economic Zone Authority (CEZA) 
under its "Financial Technology Solutions and Offshore Virtual Currency Exchange 
(OVCE) Business Rules and Regulations of 2018." Out of the 37 exchanges under 
CEZA, 24 companies were granted the OVCE Principal license while the remaining 13 
companies the OVCE Regular license. The former allows licensees to conduct offshore 
fintech business and virtual currency exchange activities while the latter allows 
licensees to conduct only offshore virtual currency exchange activities. No Philippine 
person or resident is allowed to apply for a CEZA OVCE license, which only applies for 
offshore activity, as the BSP regulates the local exchanges while the Securities and 
Exchange Commission (SEC) regulates the virtual asset offering and the operation of 
crypto-trading platforms. However, there are questions regarding the legal authority 
of the CEZA to issue licenses.


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. The same traits also 
make it easier to make online transactions in the electronic commerce industry.
Digital assets is also a possible alternative in addressing the lack of financial 
inclusion. According to the 2018 Financial Inclusion Survey, 78% 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. In addition, it also improves 
the geographic reach of the financial system among those living in far-flung areas.
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.
Given the abovementioned circumstances, the immediate passage of this bill is 
necessary.
th .h o c o /" ''
lEE R. MARCOS
Senator


EIGHTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session
SENATE
S.B. No. 1041
(©flier of tbf frftrrtn rp
'19 
SEP 11 
P 5 *12
RECElVtOW;
Introduced by SENATOR IMEE R. MARCOS
AN ACT RECOGNIZING DIGITAL ASSETS, REQUIRING THE REGISTRATION 
OF D IG ITAL ASSET ENTERPRISES, THEIR OPERATORS, AND FOR OTHER
PURPOSES
Be it enacted by the Senate and the House o f Representatives o f the Philippines in 
Congress assembled.
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Section 1. Short Title. -  This Act shall be known as the "Digital Asset Act of 2019."
Section 2. Declaration o f Policy. -  It is hereby declared the policy of the State to 
recognize without regulating digital assets as a valid means of transaction and 
investment with the objective of harnessing digital assets for growth, development, 
financial inclusion, and poverty alleviation while maintaining the stability of the 
country's economy, and protecting investors and the public concerned.
Section 3. Definition o f Terms. -  The following terms shall mean:
(a) "BSP" means the "Bangko Sentral ng Pilipinas"
(b) "Digital asset" means "e-money" and "virtual assets"
(c) "E-money" means a digital representations of fiat currency whose issue is backed by 
an equivalent fiat currency. It is an electronic store of monetary value on a technical 
device that may be widely used for making payments to entities other than the e-


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money issuer. The device acts as a prepaid bearer instrument which does not
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necessarily involve bank accounts in transactions.
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(d) "E-money Issuer" refers to any entity which provides money transfer or remittance
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services using e-money.
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(e) "SEC" means the Securities and Exchange Commission
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(f) "virtual asset" means virtual currency and virtual token.
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(g) "virtual asset business" means any of the following businesses: (i) virtual asset
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exchange, (ii) virtual asset broker, (iii) virtual asset dealer, (iv) other businesses
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related to virtual assets.
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(h) "virtual asset exchange" means a center or a network established for the purposes of
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trading or exchanging of virtual assets, which operates by matching orders or
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arranging for the counterparty or providing the system or facilitating a person who
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wishes to trade or exchange virtual assets to be able to enter into an agreement or
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match the order, in the normal course of business.
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(i) "virtual asset broker" means a person who provides services or holds itself out to the
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public as available to provide services as a broker or an agent for any person with
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respect to the trading or exchange of virtual assets in the normal course of business,
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in consideration of a fee or other remuneration.
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(j) "virtual asset dealer" means a person who provides services or holds itself out to the
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public as available to provide services with respect to the trading or exchange of virtual
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assets for its own account in the normal course of business outside the virtual asset
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exchange.
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(k) "virtual currency" means an electronic data unit created on an electronic system or
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network for the purpose of being used as a medium of exchange for the acquisition of
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goods, services or any other rights, or the exchange between virtual assets, and shall
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include any other electronic data units.
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(I) "virtual token" means an electronic data unit created on an electronic system or
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network for the purpose of: (i) specifying the right of a person to participate in an
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investment in any project or business; (ii) specifying the right of a person to acquire
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specific goods, specific service, or any specific other right under an agreement
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between the issuer and the holder, and shall include any other electronic data units of
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right.
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(m)"virtual token portal service provider" means a provider of an electronic system for an
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offering of newly issued virtual tokens who is responsible for screening the
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characteristics of virtual tokens to be offered, qualifications of the issuer and the


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completeness and accuracy of registration statement and draft prospectus for the 
offering of virtual tokens or any other information to be disclosed through such 
provider.
I service
Section 4. BSP as Lead Agency for E-Money. - The BSP shall be in charge of the 
exercise of powers under this Act over the operation of E-money and shall have the 
power to issue notifications and perform duties in accordance with this Act.
Section 5. SEC as Lead Agency for Virtual Assets. - The SEC shall be in charge of the 
exercise of powers under this Act over the offering and issuance of virtual assets, and 
the operation of virtual asset businesses. The SEC shall have the power to issue 
notifications and perform duties in accordance with this Act.
Section 6. Scope. - Securities pursuant to the law governing securities and exchange 
shall not be regarded as virtual currency or virtual token under this Act. Virtual asset 
business operators and virtual token portal service providers under this Act shall be 
regarded as financial institutions under RA No. 9160, also known as the "Anti-Money 
Laundering Act".
Section 7. Transfer o f Virtual Assets. - In case where delivery, transfer, holding or 
return of cryptocurrencies or virtual tokens is required, virtual currencies or virtual 
tokens of the same category and type and of equal amount shall be fungible.
Section 8. Operation o f E-money Issuers - For the purpose of supervision and 
monitoring of E-money Issuers, the BSP shall have the duty and power to establish 
the policies relating to the promotion and development as well as supervision and 
monitoring of E-money and E-money issuers as prescribed under this Act. Such power 
and duty shall include:
(a) the issuance of rules, regulations, notifications, orders or directives on the 
operation of E-money Issuers;
(b) the determination of fees for an application for a license or permit, granting of a 
license or permit, application for a permission, granting of a permission, filing of


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registration statements for offering of virtual tokens, filing of annual registration 
statements, other applications or undertaking of businesses under a license, license 
or permission;
(c) the prescription of criteria as a guideline for the consideration to address any 
potential issues which may arise from the enforcement of this Act;
(d) any other activities to be implemented according to the objectives of this Act.
Section 9. Offering and Issuance o f Virtual Assets. - For the purpose of supervision 
and monitoring of the issuance and offering of virtual tokens and the undertaking of 
virtual asset businesses, the SEC shall have the duty and power to establish the 
policies relating to the promotion and development as well as supervision and 
monitoring of virtual assets and virtual asset business operators as prescribed under 
this Act. Such power and duty shall include:
(a) the issuance of rules, regulations, notifications, orders or directives on issuance 
and offering of virtual tokens and virtual asset businesses;
(b) the determination of fees for an application for a license or permit, granting of a 
license or permit, application for a permission, granting of a permission, filing of 
registration statements for offering of virtual tokens, filing of annual registration 
statements, other applications or undertaking of businesses under a license, license 
or permission;
(c) the prescription of criteria as a guideline for the consideration to address any 
potential issues which may arise from the enforcement of this Act;
(d) any other activities to be implemented according to the objectives of this Act.
Section 10. Disclosure o f Information. - To protect the public interest or investors, the 
SEC shall have the duty to disclose the information relating to any violation and penalty 
imposed on such person who commits an offence under this Act, including any other 
information obtained in the performance of duties under this Act.
Section 11. License to Operate E-money Issuers. -  Only the BSP shall issue a license 
to operate E-money Issuers. Any natural or juridical person may obtain a license to 
operate E-money Issuers by filing an Application for Registration and Notarized Deeds


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of Undertaking to the BSP. The BSP shall issue the corresponding license upon 
fulfillment of the registration requirements. The E-money issuer shall commence 
operations within three (3) months from the date of issuance of the license. The E- 
money Issuer should register with the Anti-Money Laundering Council Secretariat 
(AMLCS) within thirty (30) calendar days from the actual commencement of business 
operations.
Section 12. License to Offer Virtual Tokens. -  Only the SEC shall issue a license to 
offer newly issued virtual tokens to the public. Any natural or juridical person may 
obtain a license to offer virtual tokens by filing a registration statement and a draft 
prospectus to the SEC.
The offeror of virtual tokens shall prepare and submit the following information to the 
SEC:
(a) reports concerning the results of business operation and the financial conditions;
(b) any information which may affect the rights and interests of virtual token holders 
or the decision-making on investment or the change in the price or value of virtual 
token.
The SEC shall have the power to specify in a notification the categories of virtual 
tokens or the characteristics of the offering of virtual tokens which shall be exempt 
from the requirement to submit a filing of the registration statement for an offering 
of virtual tokens and the draft prospectus under this Section.
Section 13. License to Operate Virtual Asset Business. -  Only the SEC shall issue a 
license to operate a virtual business. The application for the license and the issuance 
of the license shall be in accordance with the rules, procedures and conditions as 
specified by the SEC and is subject to payment of the application and license fees.
In operating virtual asset business, a business operator shall comply with the rules, 
procedures and conditions as specified by the SEC, taking into account the following 
matters:


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(a) sufficient financial resources for the conduct of and risks associated with its 
operations;
(b) safety of its clients' assets;
(c) security measures against electronic crime, which are capable of protecting the 
computer system and computer data as well as the management of risks associated 
with crime or other causes;
(d) appropriate accounting systems for the business and auditing by the auditor 
approved by the SEC;
(e) know-your-client measures, client due diligence process and measures against 
financial assistance to terrorists or money laundering.
Where it is necessary to maintain the economic and financial stability of the country, 
or to protect the public interest, the SEC shall have the power to specify conditions 
with which the licensed business operator shall be required to comply in operating the 
virtual asset business.
Any virtual asset business operator who has operated a virtual asset business prior to 
the date on which this Act come into force and whose business requires a license 
under this Act shall submit an application for the license as prescribed in this Act within 
ninety days from the date on which this Act comes into force if it intends to continue 
to operate the business. Upon submission of the application for the license, such 
operator may continue to operate such business until the application is rejected.
Section 14. Cessation o f Virtual Asset Business. Any virtual asset business operator 
who wishes to cease operating a virtual asset business for which it has been granted 
a license shall apply for an approval to cease its business operations from the SEC. In 
granting the approval, the SEC may specify any conditions.
If any virtual asset business operator has ceased its business operations, 
it shall 
complete the purchase, sale or exchange of virtual assets, settlement and delivery of 
any outstanding transaction.


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If it appears that a virtual asset business operator does not operate the virtual asset 
business for which it has been granted a license within the period specified by the SEC 
or suspends its operations for a period of time which is longer than those specified by 
the SEC, the SEC, shall have the power to revoke the license of such operator.
Section 15. Regulation o f Virtual Asset Business. If it appears that the financial 
condition or operations of a virtual asset business operator is in such condition which 
may cause damage to the public, or a virtual asset business operator violates or fails 
to comply with the prescribed rules, procedures and conditions, the SEC may order 
the virtual asset business operator to rectify it within the specified period of time. If 
the virtual asset business operator fails to comply, the SEC may order the virtual asset 
business operator to temporarily suspend its operations either in whole or in part 
within the specified period of time for the rectification. In this regard, the SEC may 
also specify any condition to be complied with by the virtual asset business operator 
for the purpose of rectifying the financial conditions or operations of such virtual asset 
business operator. If the virtual asset business operator fails to comply, or in the case 
of repeated non-compliance, the SEC may consider revoking its license. In this regard 
the SEC, may order the virtual asset business operator whose license is revoked to 
take any action to protect the interest of its clients.
Section 16. Revocation o f License to Operate Virtual Asset Business. Where there is 
evidence that the financial condition or operations of any virtual asset business 
operator is in such condition which may cause serious damage to the public and such 
business operator is unable to rectif/ its financial condition or operations, the SEC shall 
have the power to revoke its license. In this regard, the SEC may order the virtual 
asset business operator whose license is revoked to take any action to protect the 
interest of its clients.
Section 17. Protection o f Virtual Asset Clients. - No virtual token business operator in 
the category of virtual asset broker, including its staff members or employees who are 
aware or in possession of information related to any order for purchase or sale of any 
virtual assets or derivatives related to such virtual assets of any client of such business


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operator, shall take any of the following actions, either for the their own benefit or for 
the benefit of any other persons, in any manner that is likeiy to cause a disadvantage 
to the client:
(a) piacing, modifying, or cancelling an order for purchase or saie of virtual assets or 
derivatives related to such virtual assets by taking advantage of doing so before the 
order of such client is completely executed;
(b) disclosing information related to the order of such client to any other person 
where they know or ought to know that such other person would rely on such 
information in placing, modifying or canceiling any order for purchase or saie of virtual 
assets or derivatives related to such virtual assets before the order of such client is 
completely executed.
Section 18. Penalty Clause. -  Any virtual token offeror who fails to comply with Section 
11 and/or 12, or contravenes or faiis to compiy with the rules, procedures and 
conditions issued in accordance with Section 11 and/or 12, shail be liable to 
imprisonment for a term not exceeding two years or a fine not exceeding five hundred 
thousand pesos (PhP 500,000.00) and a further daily fine not exceeding three 
thousand pesos (PhP 3,000.00) for every day during which the contravention 
continues.
Any person who makes a false statement or conceals any fact which shouid have been 
disciosed in the registration statement for an offering of virtual tokens and draft 
prospectus pursuant to Section 11 and/or 12, shall be liable to imprisonment for a 
term not exceeding five years and a fine not less than five hundred thousand pesos 
(PhP 500,000.00).
Any virtual token offeror who contravenes or fails to comply with Section 13 and 
Section 15 shail be liable to a fine not exceeding three hundred thousand pesos (PhP
300.000. 00) and a further daily fine not exceeding ten thousand pesos (PhP
10.000. 
00) for every day during which the contravention continues.


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Sec. 19. Implementing Rules and Regulations. -  Within sixty (60) days from the 
effectivity of this Act, the SEC and the BSP shall promulgate the necessary rules and 
regulations to effectively implement the provisions of this Act.
Section 20. Repealing Clause. -  All laws or parts thereof, decrees, orders, rules and 
regulations inconsistent with the provisions of this Act are hereby repealed or modified 
accordingly.
Section 21. Separability Clause. -  If any of the provisions of this Act is declared invalid, 
the other provisions not affected thereby shall remain in full force and effect.
Section 22. Effectivity Clause. -  This Act shall take effect fifteen (15) days following 
its publication in a newspaper of general circulation or in the Official Gazette, 
whichever comes first.
Approved,
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