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‘Tap on a keyboard and make a living’

Renato R. Balisacan, Jr.

According to the October 2000 Awake! magazine article, “Is It Wise to Invest in the Stock Market?,” “the apparent ease of trading stocks online and gaining access to information previously reserved for brokers and professional traders has prompted many individual investors to take up day trading, the buying, and selling of stocks full-time. Some have given up lucrative careers to become day traders.” The article adds, “one 35-year-old man who quit his $200,000-a-year job to trade stocks is quoted as saying: ‘How else can you have no inventory and no employees, pay no rent, tap-tap-tap on a keyboard and make a living?’”

Investor interest in stock trading has modernized and gradually taken on a new face with the introduction of virtual currencies (VCs). Reports and blogs on the benefits and risks of VCs have saturated the internet and captured the attention of private entities, as well as government regulators.

None other than the Bangko Sentral ng Pilipinas (BSP) acknowledges that VC systems have the potential to revolutionize the delivery of financial services, particularly for payments and remittance, in view of their ability to provide faster and more economical transfer of fund both for domestic and international transactions. These benefits, however, should be considered along with its risks: a higher degree of anonymity, speed of transactions, volatility of prices, and global accessibility. According to the BSP, VCs pose money laundering and terrorist financing risks, information technology risks, and consumer protection and financial stability concerns, among others.

These developments prompted the BSP to issue Circular No. 944-17, providing the guidelines for VC exchanges. The BSP does not intend to endorse any VC — such as Bitcoin — as a currency since it is neither issued or guaranteed by a central bank nor backed by any commodity. Rather, the BSP aims to regulate VCs when used for delivery of financial services, particularly for payments and remittances, which have a material impact on anti-money laundering (AML) and combating the financing of terrorism, consumer protection, and financial stability.

Under the Circular, a VC refers to any type of digital unit used as a medium of exchange or a form of digitally stored value created by agreement within the community of VC users. VCs are neither issued nor guaranteed by any jurisdiction and do not have legal tender status. On the other hand, a VC exchange refers to any entity that offers services or engages in activities that provide a facility for converting or exchanging fiat currency (i.e., legal tender issued and backed by governments) to VC or vice versa.

A VC exchange shall obtain a Certificate of Registration (CoR) to operate as a remittance and transfer company and shall adhere to the BSP’s registration procedures. An exchange is required to submit the Application for Registration and Notarized Deeds of Undertaking through the appropriate department of the Supervision and Examination Sector (SES). The provisions on the issuance of BSP CoR, the accreditation of remittance sub-agents, registration with the AML Council Secretariat, and mandatory training shall also apply to VC exchanges.

Due to investors’ heightened curiosity, the Securities and Exchange Commission (SEC) has issued advisories reminding the public to take necessary precautions in dealing with VCs and initial coin offerings (ICOs). An ICO is the first sale and issuance of a new VC to the public, usually for the purpose of raising capital for start-up companies or funding independent projects.

Based on the advisories, some of the new VCs follow the nature of security, which includes an investment contract, as defined in the Securities Regulations Code (SRC). An investment contract is presumed to exist whenever a person seeks to use the money or property of others on the promise of profits.

When a VC is, likewise, analogous to any of the types of securities under the SRC, there is a strong possibility that the said VC is a security under the jurisdiction of the SEC and has to be registered and necessary disclosures have to be made to protect the investing public. Likewise, those who act as salesmen, brokers, dealers, or agents of ICO entities must be registered with the SEC.

The SEC has yet to issue a formal regulation for VCs. The Bureau of Internal Revenue (BIR), on the other hand, is always on the lookout.

There are BIR issuances governing the treatment of certain online dealings. Revenue Memorandum Circular (RMC) No. 055-2013 reiterates the taxpayers’ obligations in relation to online business transactions, including online retailing through virtual shopping malls, online marketplaces, web stores, and similar Web sites.

A circular that has to do with the use of certain mobile apps is RMC No. 070-15. It echoes the tax incidence of persons engaged in land transportation, particularly transport network companies (TNCs) like Uber, Grab, their partners/suppliers, and similar arrangements. A TNC is a pool of land transportation vehicles whose accessibility to the riding public is facilitated through the use of a common point of contact, which may be in the form of text, telephone and/or cellular calls, e-mail, mobile applications, or by other means.

These RMCs set a precedent that the BIR takes a keen interest in online activities, especially if it gives rise to a taxable transaction. The absence of an SEC and BSP blessing to VCs and VC exchanges does not stop the tax office from issuing any regulation concerning their tax treatment.

Following the initial BSP classification that VC exchanges could be considered engaged in the business of payment and remittance, such entities will be generally subject to a full range of taxes, such income, value-added, and documentary stamp taxes. Interestingly, within five years of the effectivity of the Tax Reform Acceleration and Inclusion (TRAIN) law on Jan. 1, taxpayers engaged in e-commerce are required to issue electronic receipts or sales invoices.

Individual traders, on the other hand, are obliged to report any income derived from such activities for income tax purposes. This is subject to the situs rules on online transactions, as may be clarified by the tax office.

This author, of course, does not intend to dissuade anyone from investing in this kind of business, if caution is exercised. Just like any other investment, doing a cost-benefit analysis is highly recommended, since it involves hard-earned income.

The article mentioned at the beginning of this article noted: “How a person chooses to invest his money is a personal decision. Guided by a sound mind and contentment with the necessities of life, an investor does well to keep financial concerns in their place, not neglecting his or her family responsibilities and spiritual needs.”


Renato R. Balisacan, Jr. is a manager of the Tax Advisory and Compliance of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing services firms in the Philippines.


As published in BusinessWorld, dated 06 March 2018