Below is an overview of the legal and regulatory landscape for buying and selling cryptocurrencies (“crypto”) in the Philippines. While this article aims to consolidate essential information, it is not a substitute for professional legal advice. Always consult licensed Philippine legal counsel for specific concerns.

1. Regulatory Authorities and Governing Laws

1.1 Bangko Sentral ng Pilipinas (BSP)

Primary Regulator for Virtual Currency Exchanges (VCEs).
The BSP exercises regulatory oversight over businesses and entities offering exchange services for virtual currencies (VCs), including cryptocurrencies. This was first articulated in BSP Circular No. 944 (2017), which classifies VCs as digital representations of value and requires certain VCEs to obtain a Certificate of Authority to operate.
Scope of BSP Regulation.
BSP supervision mainly addresses:
- Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) requirements (i.e., compliance with Republic Act No. 9160 or the Anti-Money Laundering Act, as amended).
- Know-Your-Customer (KYC) protocols, transaction monitoring, and reporting of suspicious activities.
- Consumer protection measures, such as disclosure requirements and dispute resolution mechanisms.

1.2 Securities and Exchange Commission (SEC)

Regulation of Crypto as Securities (If Applicable).
The SEC may treat certain cryptocurrencies or tokens as “securities” if they meet the criteria under the Howey Test or under Philippine securities laws (e.g., the Securities Regulation Code). For instance, initial coin offerings (ICOs) or token offerings with profit-sharing or investment-like characteristics could fall under the SEC’s jurisdiction.
Initial Coin Offerings (ICO) Rules.
The SEC has issued draft rules for ICOs in the past, indicating that tokens with certain investment features may require registration, disclosures, and compliance with rules similar to traditional securities.

1.3 Anti-Money Laundering Council (AMLC)

Compliance with AML/CFT Requirements.
Pursuant to the Anti-Money Laundering Act of 2001 (AMLA), entities dealing with crypto are considered “covered persons” if they engage in activities resembling financial services. These entities must register with the AMLC, implement KYC protocols, and report covered and suspicious transactions.

1.4 Bureau of Internal Revenue (BIR)

Taxation of Crypto Transactions.
The BIR has been actively reminding taxpayers of their obligation to declare income from digital asset transactions. Although specific guidelines on crypto taxation are still evolving, the following taxes generally apply:
- Income Tax: Gains from crypto trading or investments may be considered part of gross income.
- Value-Added Tax (VAT) or Percentage Tax: Depending on whether the taxpayer is engaged in trade or business and on the nature of the transaction.
- Withholding Tax: Where applicable (e.g., if employers pay salaries in crypto or if there are commissions or fees earned from crypto transactions).
- Documentary Stamp Tax (DST): Potentially applicable if transactions are documented in certain forms recognized by Philippine law (although this is less common in purely digital transactions).

2. Licensing Requirements for Crypto Platforms

Virtual Currency Exchange (VCE) License
Companies offering exchange services—where customers can buy or sell cryptocurrencies in exchange for fiat (e.g., PHP)—must apply for a VCE license from the BSP. Failure to do so renders the entity’s operations unauthorized, exposing it to administrative, civil, and possibly criminal liability.
Maintaining Registration
Once licensed, VCEs must:
- Submit periodic reports on operations (including volume of transactions and compliance measures).
- Implement stringent cybersecurity and operational risk controls.
- Maintain reserve requirements (if any) and robust consumer protection policies.

3. Liability Issues in Crypto Buy and Sell Transactions

3.1 Liability of Exchanges and Platforms

Unauthorized or Fraudulent Transactions
- Exchanges may be held accountable if they fail to implement standard security measures (e.g., two-factor authentication, proper encryption, KYC/AML protocols).
- They can face administrative sanctions, fines, or license revocations by the BSP if found negligent.
Consumer Protection Violations
- Misleading marketing claims or failure to disclose risks can expose platforms to liability under the Consumer Act of the Philippines or related regulations.
- Exchanges could also face contractual liability if their terms of service conflict with Philippine consumer protection laws.
Money Laundering-Related Liabilities
- Exchanges and their officers risk criminal charges for willful blindness or failure to comply with AML/CTF laws, including the duty to report suspicious transactions to the AMLC.

3.2 Liability of Buyers and Sellers

Tax Liabilities
- Individuals and entities buying or selling crypto must declare their transactions for tax purposes. Failure to comply can lead to penalties, interest charges, or criminal prosecution under the National Internal Revenue Code.
- Concealment of gains from crypto trading is considered tax evasion.
Compliance with AML Laws (in Some Cases)
- Although the primary burden is on VCEs, large or suspicious transactions by individuals can attract AML scrutiny.
- Buyers and sellers may be required to explain the source and use of funds to authorities.
Civil or Contractual Liability
- Peer-to-peer (P2P) transactions, often done through informal channels, can lead to civil disputes if one party fails to fulfill an obligation (e.g., not transferring the crypto after payment, or vice versa).
Potential Criminal Liability
- If cryptocurrency is used for illicit activities such as fraud, cybercrime, or to launder money, participants in these transactions could be prosecuted under Philippine criminal statutes (e.g., the Revised Penal Code, the Cybercrime Prevention Act, or the AMLA).

4. Key Risk Management and Compliance Measures

4.1 Know-Your-Customer (KYC) and Due Diligence

Both platforms and private individuals dealing in large sums should verify the identity of parties involved in transactions to mitigate fraud and ensure compliance.
VCEs must gather and retain customer information per BSP guidelines, including government-issued IDs and proof of address.

4.2 Record-Keeping

BSP Circular 944 mandates record-keeping of crypto transactions for at least five (5) years.
Accurate and organized records help defend against potential audits by the BIR or investigations by the AMLC.

4.3 Contracts and Disclosures

Clear contractual documentation (even in P2P transactions) specifying payment terms, dispute resolution, and regulatory compliance obligations reduces the risk of misunderstandings.
Exchanges should provide disclaimers and risk disclosures, such as volatility warnings and instructions on safe custody of digital assets.

4.4 Insurance and Custodial Services

Some VCEs and wallet providers maintain insurance for stored digital assets to protect against hacking or theft. While not mandated by law, having insurance and secure custodial infrastructure can mitigate potential liability.

5. Enforcement and Penalties

Administrative Sanctions (BSP)
- BSP can impose fines, suspend licenses, or revoke VCE certificates for non-compliance with Circular 944 and related regulations.
Civil Liability
- Affected parties (e.g., customers who lost funds) can pursue civil actions for breach of contract or negligence. Courts may award damages for financial losses.
Criminal Penalties
- Willful failure to comply with AML laws may result in imprisonment or fines under the AMLA.
- Tax evasion is a criminal offense under the National Internal Revenue Code.
- Securities fraud (if crypto tokens qualify as securities) is punishable under the Securities Regulation Code.

6. Emerging Developments

Digital Asset Exchanges in Special Economic Zones
- Certain zones, such as the Cagayan Economic Zone Authority (CEZA), have tried to attract crypto-related businesses through specialized licensing regimes. While offering incentives, these zones still require compliance with national laws regarding AML, consumer protection, and taxation.
Central Bank Digital Currency (CBDC) Explorations
- The BSP has researched the feasibility of launching a CBDC, which could further influence crypto regulations and market acceptance.
SEC Finalized Rules on ICOs/Token Offerings
- The SEC has continued to update its draft rules. Once finalized, these rules might clarify how certain tokens qualify as securities and what registration and reporting requirements apply.
Heightened AML/CTF Enforcement
- Recent global attention on money laundering and terrorist financing has increased regulatory scrutiny. Philippine authorities are actively coordinating with international bodies (e.g., FATF) to ensure rigorous enforcement.

7. Practical Tips for Compliance

For Businesses (VCEs, Crypto Platforms):
- Obtain and maintain the proper BSP license.
- Implement strict KYC, AML, and cybersecurity measures.
- Monitor regulatory updates (BSP, SEC, AMLC, BIR).
- Provide robust consumer protection mechanisms, dispute resolution protocols, and transparent fee structures.
For Individual Traders/Investors:
- Report crypto gains or losses to the BIR.
- Use licensed VCEs or reputable trading platforms.
- Keep thorough records of transactions (dates, counterparties, amounts).
- Be wary of potential scams; conduct due diligence before transacting.
- Understand that certain tokens may be considered securities and subject to SEC requirements.
For Legal and Compliance Professionals:
- Regularly review BSP Circulars and SEC Advisories.
- Train staff and clients on AML/CFT guidelines and best practices.
- Implement or update internal protocols for auditing, record-keeping, and transaction monitoring.

8. Conclusion

Liability for crypto buy and sell transactions in the Philippines hinges on a rapidly evolving regulatory environment led by the BSP, SEC, AMLC, and the BIR. Key issues include proper licensing of virtual currency exchanges, strict adherence to AML/CFT measures, compliance with securities and tax laws, and robust consumer protection and cybersecurity safeguards.

As the crypto industry matures, Philippine regulators will likely introduce new or updated rules to address emerging risks and technologies (e.g., decentralized finance, non-fungible tokens, stablecoins, and CBDCs). Participants in the crypto market—whether as exchanges, businesses, or individual buyers and sellers—should stay informed of these developments to minimize legal exposure and ensure continued compliance with Philippine laws.

Disclaimer: This article provides general information and should not be treated as legal advice. For specific concerns or situations, consult qualified Philippine legal counsel.