IX.

TREATMENT OF BITCOIN UNDER PHIL CIVIL LAW

a. How will contract arise in such exchange.

In commercial transactions, Bitcoin is used for delivery of financial services, particularly

for payment and remittances. The holder of Bitcoin may use such to purchase goods or
services. In this instance, there has to be an underlying contract entered into between the
parties such as sale of goods or services and Bitcoin is simply resorted mode of payment on the
part of the buyer. In this context, it is clear that in for one to be able to use Bitcoin, he/she must
enter into a contract of sale to purchase bitcoin. After which, the Bitcoin could be the “cause”
in an underlying contract such as in the sale of goods.

a.1 Contract of sale of bitcoin

Users of Bitcoin must purchase the same from a Bitcoin company. In this context, the
Bitcoin would be the object of such contract of sale. Article 1347 of the Civil Code provides, “All
things which are not outside the commerce of men, including the future things, may be the
object of a contract. All rights which are not in transmissible may also be the object of a
contract.” Bitcoin can be an object of a contract considering that it complies with the requisites
of Object, to wit:

(a) That it must be within the commerce of man, either existing or already existing.
Bitcoin just like any other property is capable of appropriation and transmission. The
transmission must however be with the help of the Bitcoin company and “the master database
of Bitcoins, called the Block Chain.”i

(b) That the object must licit, or not contraty to law, morals, good customs, public order,
or public policy. The Bangko sentral ng pilipinas, thru a circular, “requires a virtual currency
exchange that deals in Bitcoin to obtain from the BSP a Certificate of Registration to operate as a
remittance and transfer company.”1 This shows that the BSP which oversees the flow of
currency sees Bitcoin as legal. The BSP ruling implies that it allows everyone to engage in
Bitcoin if they want. It must only be regulated to guard the public engaging in it considering that

1
BSP Circular No. 944
virtual currencies are not issued or guaranteed by any jurisdiction and do not have any legal
tender status. As a caveat, said Circular further provided that “the Bangko Sentral does not
intend to endorse any VC, such as bitcoin, as a currency since it is neither issued nor guaranteed
by a central bank nor backed by any commodity.”2
(c) Possible and determinate as to its kind and determinable as to its quantity. Bitcoin is
just one of the cryptocurrencies that is being used today whose value may change but is
certainly determinable.

In the Philippines, one can buy Bitcoins through the banks from registered Bitcoin
Companies in this jurisdiction. Mislos discussed that “the registration allows bitcoin companies
to deal with banks. In addition to the costs needed to establish a business, buying bitcoin in the
Philippines means the user pays in peso to receive Bitcoin. Coins.ph allows you to fund your
Bitcoin wallet directly from your bank. The same is true with the other websites.”3 From this,
the Civil Code of the Philippines applies in such transaction as it involves contract of sale. Under
the law, a contract of sale is a reciprocal contract, hence, once the other party performs what is
incumbent upon him, he can compel the other party to perform its obligation under the
contract. In an online transaction, it could happen that the buyer pays first before the thing is
delivered or it could be cash on delivery. The mode of payment depends upon the agreement
of the parties. In the sale of Bitcoins, most make a purchase through the bank, hence, the risk is
lessened as banks are considered expert in dealing with such transactions.

It must be clarified however that the involvement of banks is not always becessary to
buy or use bitcoins. In fact, “Bitcoin is an online currency that allows people to make one-to-
one transactions, buy goods and services and exchange money across borders without involving
banks, credit card issuers or other third parties.”4

2
circular
3
https://bitpinas.com/cryptocurrency/is-bitcoin-legal-in-the-philippines/ milos
4
http://business.inquirer.net/241672/filipinos-warned-vs-bitcoins-
cryptocurrencies#ixzz5BmcPCm1n

Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook”

 a.2. Bitcoin as the consideration in a main contract

Under the law, there are three (3) essential elements of a contract. Article 1318 of the
of the Civil Code provides that “There is no contract unless the following requisites concur: (1)
Consent of the contracting parties; (2) Object certain which is the subject matter of the contact;
(3) Cause of the obligation which is established.”ii From these three, the use of Bitcoin only
finds it significance in the third element, the cause. The law provides that “In onerous contracts
the cause is understood to be, for each contracting party, the prestation or promise of a thing
or servise by the other.”5 Cause is the impelling reason why a party assumes an obligation. For
instance, on the part of the seller, the cause would be the price. This is where Bitcoin comes
into play when used as a substitute for money if agreed by the parties.

a.3. Bitcoin as a means to transfer money

Cryptocurrencies like bitcoin are also an appealing mode for money transfer as they are a
promising low-cost remittance platform for Filipino workers sending their earnings home. In this
transaction, the law applicable to remittance companies would also apply.
However, the government issued a strong warning against this form of transaction as they
are extremely risky investments due to lack of regulatory protections for consumers.

Online, bayad mu nab ago may contrata…online purchare, 3 modes. Order, shiping details. Payment mode, pag
nacomply mu na lahat bago may contract…may obligation to deiver…pag nagbayad
Conditional conditional sale---no payment contract is extinguish…

Governing Laws
Bitcoin is used in commercial transactions. It is, however, a known fact that “Bitcoin is not a legal tender in any
jurisdiction and is not backed by any government. It is not issued by or redeemable at any financial institution and”6 Hence, the
laws applicable could be Commercial Usages and Practice, International Standard Banking Practice, the New civil code of the
Philippines, and rules and regulations issued by the Bangko Sentral ng Pilipinas.
The application of those laws would be as far as practicable as there are yet no laws that are directly governing such
virtual currency except for some circulars issued by some States for regulation purposes. Despite such fact, the use of Bitcoin
and other cryptocurrencies as a mode of payment are growing in popularity. Many however are still hesitant to use it as it is
neither monitored by a central bank nor backed up by any commodity. The parties then who decide to use such will be doing so

5
Aticle 1350 of the Civil code
6
Middlebrook, Stephen
in their own risk. The user base is still quite small compared to that of checks, credit and debit cards, and electronic funds
transfers which are tested and accepted as reliable. However, study shows that a growing number of businesses and individuals
are adopting Bitcoin as a payment.

b. Definition and Nature of Bitcoin

Bangko Sentral ng Pilipinas Circular No. 944 provides that “a virtual currency (VC), such as bitcoin, refers to any type
of digital unit that is used as a medium of exchange or a form of digitally stored value created by agreement within the
community of VC users.”7 The key phrases here show that VCs or bitcoins are intended more as a medium of exchange and that
their usage is more by agreement among the community of users. The use of Bitcoin then purely depends upon the will of parties
as there is no law which compels them to use such in their transaction. From the foregoing, it is clear that there is always a main
contract that would trigger the use of bitcoin.

b. Parties
There are at least three (3) parties to a transaction involving Bitcoin. First, would be the buyer, he/she procures the
Bitcoin from companies. Second, the company which issues bitcoin

Under Article 1305 of the Civil Code, “A contact is a meeting of the minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service.”
The mode of payment then has nothing to do with the main contract as it only deals with performance.
Under common practice, the use of cryptocurrencies such as bitcoin is only a mode of payment. Hence, there must be
an underlying contract between the parties. Bitcoin will only come into play when the parties mutually agree of the use of the
bitcoin as a mode of payment.

IX. Treatment of Bitcoin under Phil Civil Law. How will contract arise in such an exchnage (Berto) -- cite provi, jurisprudence b.
How will bitcoin affect legal obligations of parties ( Marco) -- cite provi, jurisprudence
I. Intro (March)

II. History of Bitcoin (Sir @OwenGin Sirwyn Pata Mortera )

III. The Economics of Cryptocurrency (Mam @Red Bans ) -- How it works po. Not just theory.

IV. Countries which adopted Bitcoin as a medium of exchange (Mam @Mer Cy )

V. How is Bitcoin relevant to Phil Economy ( Jess)

VI. Bangko Sentral ng Pilipinas on Bitcoin (Mam Daves) --make reference to BP Circ 944

VII. Assessing E-Peso Feasibility (Ma'am Jen)

VIII. Salient Provisions and Purpose of HB 4914 ( Jaylord)

IX. Treatment of Bitcoin under Phil Civil Law

a. How will contract arise in such an exchnage (Berto) -- cite provi, jurisprudence

b. How will bitcoin affect legal obligations of parties ( Marco) -- cite provi, jurisprudence

X. Vulnerabilities of Bitcoin (Sir Don)

XI. Regulatory Challenges of Bitcoin in the Philippines (Mam Rich)

XII. Constitutionality of HB 4941 ( Ate Reese)

XIII. Summarry/Policy Recommendations (March)

How to properly cite:

Author's name. Year. Title. Website. Date of Accessed.

7
Under Circular No. 944
Example:
Balicdang, Berto. 2018. The Viability of Viagra in the Philippines. Accessed at www.bertothegreat.cambridge.uk on March 10,
2018

Cambridge Area Guide - Cambridge,

IX. Treatment of Bitcoin under Phil Civil Law a. How will contract arise in such an exchnage (Berto) -- cite provi,
jurisprudence b. How will bitcoin affect legal obligations of parties ( Marco) -- cite provi, jurisprudence

i
brook
ii
ja