Population: 110 million

Wealth in domestic bank deposits: 342 billion USD (December 2023)

Offshore expatriated wealth: 12.6 billion USD

Main offshore banking locations: N/A

Number of individual brokerage accounts: 1.4 million (2021)

Crypto adoption (% of population): 15.3 million (13%)

TLDR

The Philippines has taken a balanced regulatory approach to promote economic growth and safeguard consumers in financial services. Oversight bodies like the central bank and securities regulator emphasize transparency, licensing regimes, and investor qualifications to ensure market integrity. Recent liberalization in foreign exchange rules aims to facilitate digital payments and investment. The country is also pursuing innovation in emerging areas like blockchain and crypto, given substantial adoption, while boosting coordination between regulators, industry and academia.

Exchange Controls

Foreign exchange transactions in the Philippines are governed by regulations of the Bangko Sentral ng Pilipinas (BSP) consolidated in the Manual of Regulations on Foreign Exchange Transactions. This FX Manual applies to banks, non-bank entities and individuals undertaking foreign currency transactions.

Compliance is required with relevant laws and regulations including Know Your Customer (KYC) rules, anti-money laundering, and prudential norms for banks. For foreign currency purchase from banks, submission of the application form and supporting documents is mandated, which can be done electronically. Minimum requirements pertain to aspects like import payments, offshore medical/living expenses and foreign investment registration.

Banks can undertake sale of foreign exchange between themselves, their forex affiliates and individuals/entities. However, dealings by non-bank entities like money changers and remittance agents have separate BSP regulations.

To enable digital payments and support infrastructure projects, the BSP has recently eased rules by allowing banks to sell foreign exchange for certain purposes without prior approval. This applies to transactions like imports for construction contracts, offshore living/medical expenses and digital payments. The procedural streamlining aims to reduce costs, improve convertibility of the Philippine Peso, and attract foreign capital.

Distribution of Foreign Investment Products

The regulatory framework consists of the Securities Regulation Code and rules established by the Securities and Exchange Commission (SEC). Foreign securities issuers must register and make adequate disclosures before public offerings to safeguard investors. Licensed broker-dealers are required for securities dealings. Marketing content must provide balanced information on product risks and rewards. Unqualified investors face restrictions in purchasing certain securities. Foreign ownership limits also exist in specific sectors.

Qualified Investors

The Philippines Securities and Exchange Commission (SEC) defines qualified investors under Memorandum Circular No. 6, Series of 2007. This establishes two categories – qualified individual buyers and qualified institutional buyers.

For qualified individual buyers, the criteria include:

• Minimum annual gross income of ₱25 million for preceding 2 years
• Total portfolio investments of at least ₱10 million registered with the SEC
• Personal net worth of not less than ₱30 million
• Engagement in securities trading for at least 1 year, either directly or via a fund manager
• Professional experience of minimum 2 years in roles like legal consultants, financial advisors, broker-dealer salespersons or finance/treasury officers in banks. This assumes requisite knowledge in securities trading.

For qualified institutional buyers, the requirements are:

• Minimum ₱100 million annual gross income for preceding 2 years
• Total investment portfolio of at least ₱60 million registered with the SEC
• Net worth of not less than ₱100 million

The SEC mandates documentation like income tax returns and a signed information sheet to verify investor qualifications. The registration as a qualified buyer is valid for 2 years and subject to renewal based on favorable recommendation and SEC approval.

Importantly, securities purchased by qualified buyers cannot be freely transferred or sold to non-qualified investors, limiting secondary market activity. The criteria aim to identify investors assumed to have the capability to understand complex investment structures based on their income, experience and existing portfolios. This allows access to certain products with heightened risks and restrictions unsuitable for retail participation. The SEC memorandum took effect in January 2008.

Cryptocurrency Regulation

The regulation of cryptocurrencies and virtual assets in the Philippines involves various government entities. The Bangko Sentral ng Pilipinas (BSP) emphasizes licensing and oversight of crypto firms providing services using virtual currencies. Firms must register with the BSP and implement risk mitigation measures around areas like know-your-customer (KYC) rules and asset custody.

The Securities and Exchange Commission (SEC) is developing guidelines for digital asset offerings and tokens through collaboration with the University of the Philippines Law Center. The Cagayan Economic Zone Authority (CEZA) and Asia Blockchain and Crypto Association have also developed a framework for Digital Asset Token Offerings.

Cryptocurrencies are not designated as legal tender but permitted for specific financial services like remittances and payments. The large unbanked population views cryptocurrencies as an affordable payments alternative, driving adoption. The country has a significant crypto presence, ranking 10th globally with over 11.6 million users. Leading cryptocurrencies include Bitcoin, Ripple, Bitcoin Cash and Ethereum.

While recognizing the opportunities, regulators remain cautious to protect consumers. The BSP postponed a comprehensive crypto legal framework planned for 2022 to study market risks following issues like the FTX collapse. But active engagement between oversight bodies, industry players and academia indicates commitment to balanced crypto regulation for innovation and integrity.