BSP issues new warning on virtual currencies
With increased interests in virtual currencies (VC) such as Bitcoin, the Bangko Sentral ng Pilipinas (BSP) reissued its earlier warning against the risks including money laundering and its pyramid-like marketing as an investment vehicle.
The BSP said that usage of VCs in the Philippines has gained momentum as payment and in sending remittances due to its “faster, cheaper, and convenient way” of transactions, but it also noted that investors could be tempted in placing their funds in VC pyramid schemes.
“With the recent price surge of virtual currencies such as Bitcoins, the BSP has observed that an increasing number of individuals or entities may be tempted to ‘invest’ in VC pyramid schemes disguised as initial coin offerings (ICOs) or virtual currency investment products,” it said.
“The public is therefore advised to exercise caution regarding the acquisition, possession, trading of VCs or dealing with virtual currency-related offers,” the BSP added.
The BSP said VCs are not stocks or debt issues and are “not backed by any company or commodity and the price is purely dependent on market demand and supply.”
“As such, investing in VCs presents a highly speculative and risky undertaking which might result into huge financial losses. To minimize risks, the BSP highly encourages existing and prospective VC users to deal only with BSP-registered VC exchanges and maintain only a sufficient amount of VCs enough to address transaction requirements,” warned the BSP.
The BSP also cautioned the investing public of the “propensity” of VCs to be used in illicit activities such as money laundering and terrorist financing.
To date, after the central bank approved and implemented Circular No. 944 in February last year which allowed VC exchanges or businesses so long as those engaged in it will register with the BSP as remittance and transfer companies, they have approved two remittance firms and are reviewing more applicants.
When registered with the BSP, VC exchanges must employ basic controls on anti-money laundering and terrorist financing, technology risk management and consumer protection, according to the circular.
“Notwithstanding said issuance, the BSP does not, in any way, endorse VCs as legal tender, store of value or an investment vehicle,” the BSP reiterated in a statement.
The central bank issued security tips for users of VCs and to ensure their personal information and transactions are protected. The security tips are:
•Set-up and use a dedicated email account. Avoid using the same email accounts or
username that you have used in public platforms such as social media.
• Keep your VC-related email account to yourself. In any VC transaction, users need their email account and password. Thus, it is important to secure not only your password but also your email account.
• Set a strong password. Use complex and hard-to-guess passwords (such as alphanumeric including symbols, lower and upper cases). Avoid re-using the same password for more than one service.
• Observe basic Internet security. Exercise caution in accessing your virtual currency wallet especially when using Wi-Fi connections. Avoid installing software, browser plugins or downloading attachments from unknown or suspicious websites and emails. At the same time, do not leave your device unattended.
• Subscribe to multi-factor authentication (MFA) provided by the VC wallet provider. VC users should enable, whenever available, MFA options to their virtual currency accounts. Adding another layer of authentication can provide increased security to your VC account and transactions.
• Separate your funds and use cold storage. VC funds should be separated in two or more digital wallets for transactional purposes. The main wallet used to store VC funds for future use should be kept offline or popularly known as cold storage wallet to minimize vulnerability to theft, hacking or fraud.