As cryptocurrency trading gains popularity in the Philippines, many traders and investors are left wondering about the legal landscape surrounding their activities.

One crucial area of concern is the taxation of crypto trading and whether the Philippine government offers adequate protection from cyber threats like hacking and phishing.

This blog will explore the current tax rules and the government's role in protecting crypto traders and investors, along with some pointed criticism of its efforts.

Taxing Cryptocurrency in the Philippines

The taxation of cryptocurrency transactions in the Philippines is primarily governed by the rules of income and capital gains taxation.

However, the treatment of crypto earnings can vary depending on whether the trader is an individual or a corporation.

• For Individual Traders:

Cryptocurrency gains are subject to personal income tax, which follows the progressive tax rates of 0% to 35%.

If an individual is trading crypto as part of a business activity, the profits are classified as business income.

For casual or occasional traders, crypto gains may be treated as capital gains, though clear guidelines on this classification are still lacking.

• For Corporations:

Corporations engaged in crypto trading are subject to the standard 25% corporate income tax on their net income.

Cryptocurrency-related earnings are considered part of regular business income.

• Capital Gains Tax (CGT):

For investors who consider crypto as an investment, capital gains tax may apply.

However, like forex, the rules specific to cryptocurrency are still ambiguous, leading to confusion on how exactly profits should be taxed.

Additionally, transactions involving cryptocurrencies may also be subject to documentary stamp tax (DST), depending on the structure of the transaction.

The Problem: Lack of Clarity in Taxation

One of the most significant challenges cryptocurrency traders face is the lack of specific tax guidelines on crypto trading in the Philippines.

Unlike traditional investment vehicles such as stocks or bonds, cryptocurrency trading does not have a well-defined set of tax rules.

This ambiguity makes it difficult for traders to fully comply with their tax obligations.

This lack of clarity often leads to inconsistent tax enforcement.

Traders are left figuring out their tax liabilities on their own, which can result in confusion, potential under-reporting, or over-taxation.

This creates an environment of uncertainty for cryptocurrency traders in the country.

Government Services for Protecting Crypto Traders

In terms of cybersecurity and investor protection, the Philippine government has implemented some mechanisms, but the effectiveness and reach of these efforts are still limited when it comes to cryptocurrency.

• Bangko Sentral ng Pilipinas (BSP):

The BSP regulates the financial sector and has issued advisories warning against unlicensed cryptocurrency platforms.

It also enforces cybersecurity standards for licensed exchanges and institutions.

However, retail traders using international or unregulated platforms are left exposed to risks, as the BSP’s jurisdiction is limited.

• Cybercrime Investigation and Coordination Center (CICC):

This agency was established to address cybercrimes such as hacking and phishing.

While it’s a step in the right direction, critics argue that the response times and overall reach of the CICC are not enough to protect the growing number of crypto traders.

• National Privacy Commission (NPC):

The NPC is responsible for ensuring that personal data, including financial information, is protected under the Data Privacy Act.

However, with the global nature of crypto trading, many platforms fall outside the scope of Philippine regulations, limiting the NPC's effectiveness in protecting traders.

Inadequate Protection Against Hacking and Phishing

Despite existing laws and agencies aimed at protecting consumers, there are still significant gaps in the level of protection offered to cryptocurrency traders in the Philippines.

Traders are particularly vulnerable to scams, hacking, and phishing attacks, due to several key issues:

1. Lack of Crypto-Specific Regulations: Unlike traditional investments, cryptocurrency trading does not have dedicated government oversight. This leaves traders vulnerable to unregulated exchanges and platforms, both local and international, where risks are higher.

2. Delayed Government Response: While there are laws to combat cybercrimes, the actual enforcement is often slow. Crypto traders affected by hacking or phishing attacks experience long waits for government action, with little chance of recovering their lost funds.

3. Low Awareness and Education: The government’s efforts in educating the public about the risks involved in crypto trading have been insufficient. Many traders lack an understanding of the security risks they face, making them easy targets for phishing scams and fraud.

The Need for Stronger Investor Protection

As cryptocurrency trading continues to grow in the Philippines, it is crucial that the government steps up its efforts to protect traders and investors.

This includes creating clearer guidelines for taxation, implementing more specific regulations for cryptocurrency platforms, and enhancing cybersecurity measures to prevent hacking and phishing.

While the government has made some progress, the crypto market’s unique needs remain largely unmet.

There is a need for faster response times, stronger enforcement of laws, and more robust educational programs to ensure traders are well-informed about the risks.

Conclusion

The Philippine government has made strides in regulating certain aspects of financial markets, but it still has a long way to go in taxing cryptocurrency and providing sufficient protection against online threats.

Crypto traders and investors continue to face unclear tax guidelines and inadequate cybersecurity defenses.

As the crypto market expands, it’s essential that these gaps are addressed to create a safer and more transparent environment for all traders.