In his Mandatory Continuing Legal Education (MCLE) lectures for the lawyers of the Securities and Exchange Commission (October 15, 2015), the Office of the Solicitor General (October 8, 2015) and the Bangko Sentral ng Pilipinas (October 2, 2015), and his lectures for the law students of three Cebu universities (November 18, 19, 20, 2015) Dr. Atty. Noel G. Ramiscal discussed some of the technical features of the cryptocurrency called Bitcoin. This virtual currency is already available in the Philippines since 2014. Currently the Philippine online Bitcoin exchanges are unregulated by any Philippine government agency. This may be an unfortunate circumstance when Philippine Bitcoin users realize that it is a hypervolatile currency that can rise in value of up to U.S. $1,200 per Bitcoin or down to $0.00 when an exchange loses all its Bitcoins due to hacking which is what happened to the Mt. Gox exchange in Japan in 2014.
Bitcoin for BSP, Dr. Atty. Noel G. Ramiscal, Oct. 2, 2015
But even with the fall of Mt. Gox, Bitcoins continue to be popular for several reasons, chief of which are three. First, since Bitcoins are mined using a peer-to-peer system software, they can be transferred almost instantaneously to any part of the world, to any digital wallet, that mined them or bought them without the delay associated with traditional money wire transfers. The second, and the most attractive reason is the anonymity provided to the user/miner/seller/buyer. Cryptocurrencies like Bitcoins are designed to be as good as cash, without requiring the user to divulge his/her identity or any information pertaining to the transaction. And third, since Bitcoin transactions are not regulated by any third party/agency, the usual reporting and transaction costs are not present.
Bitcoin currently has legal uses. It could be used to purchase items from some Philippine stores (e.g., Bench reportedly accepts Bitcoins as payment). It could be used to make donations. It could also be used for investment purposes. But the selling point in the Philippines is that Bitcoins can be used for overseas money remittances due to the ease and small costs of transaction in comparison with other established money transmitters.
Rightly or wrongly, Bitcoins have been associated with the dark, netherworld of the Internet. It is the most popular cryptocurrency accepted in internet black markets like Silk Road, where combined with other secure mechanisms employed by the denizens of these markets, the digital trail for these transaction are almost impossible to trace. Bitcoins are employed as mode of payment for contract killings, online child pornography, stolen credit cards, fictitious IDs, illegal drugs, and there is even anecdotal evidence that these are used in human trafficking. In his MCLE lecture at the SEC, one of their knowledgeable lawyers revealed that the Philippine Drug Enforcement Agency (PDEA) has verified that Bitcoins are used by Philippine illegal drug traffickers. In his lecture for South Western University, he cited international reports that bitcoins are also used to fund global terrorism.
One of the suggestions of Dr. Ramiscal is to look at Philippine bitcoin exchanges which target the Philippine multi-billion dollar remittance market kept alive by the remittances of our Philippine overseas workers, as money transmitters and regulate them as such. Another suggestion of Dr. Ramiscal is to look at how Philippine Bitcoin users use the money. If they buy Bitcoins for investments, then their gains should be reported and taxed. The Philippine SEC should probably consider if Bitcoins are a form of “security” that it can regulate. While for now, they are not illegal per se, Bitcoins have been banned in China and Russia because they can destabilize the local currency.
In the family law arena, there is also evidence that proves that Bitcoins are utilized by tech savvy spouses to hide their monetary assets from their spouses and children. This is especially crucial in the dissolution of the marriage and in the ensuing division of the marital assets of whatever property regime the spouses had established during their marriage under Philippine laws. It may also affect the settlement of estates and the legitimes of the legal heirs who survive a Bitcoin user.
Bitcoin for SEC, Dr. Atty. Noel G. Ramiscal, Oct. 15, 2015
Dr. Ramiscal wrote something about this type of cryptocurrency in his book “Cryptology: The Law and Science of Source Codes and Electronic Secrets”. Philippine lawyers should take the time to know the technical intricacies of this virtual currency and how to discover it, to serve their clients better.
Many thanks to the UP IAJ, the SEC, the OSG, the BSP and the SWU. Especial thanks to the fabulous Atty. Celia Sandejas (a fellow MCLE lecturer) and some of the gorgeous BSP lawyers that truly appreciated Dr. Ramiscal’s lecture. Deo Gratias!
Philippine Law Bytes: TheCyberLawyer Issues by Dr. Attorney Noel Guivani Ramiscal 