MEMORANDUM

FROM: [●]

TO: [●]

RE: BSP Registration as FXD/MC/RTC

DATE: [●]

Background

The gaming chips of [●] (the “Corporation”) are in [●] (“[●]”) and in [●] (“[●]”), and the player can choose to
buy either of the two or both using virtually any legal currency. The rate of conversion used at buy-in will be
the same rate of conversion that will be used when returning to the player the amount he/she gave at buy-
in, if applicable. Furthermore, the Corporation will only keep the currencies it received from players at buy-
in and hold it for them; any foreign exchange dealing or money changing will not be done by the Corporation.

The question at hand is whether or not the Corporation will be considered under applicable Philippine laws
and rules as being engaged in the business of foreign exchange dealing or money changing and therefore
required to register with the Bangko Sentral ng Pilipinas (the “BSP” or “Central Bank”).

BSP registration as a FXD/MC is not required

The Central Bank, in its Manual of Regulations for Non-bank Financial Institutions (the “MORNBFI”), defines
(i) foreign exchange dealers (“FXD”) or money changers (“MC”) and (ii) foreign exchange dealing or money
changing as follows:

Ҥ 4511N.1 (2016 - Registration) Definition of terms.

xxx
c. Money Changer (MC)/Foreign Exchange Dealer (FXD) – refers to any entity who engages
in money changing/foreign exchange dealing business. This includes authorized agent banks’
subsidiary/ affiliate forex corporations (AAB-forex corps), among others.
xxx
e. Money changing/Foreign exchange dealing – refers to the buying or selling of currencies in
exchange for another currency.”

The above shows that, to be considered a FXD/MC, the Corporation will have to actually buy and sell
currencies in exchange for another as a business. However, the issuance of [●] or [●]-denominated gaming
chips to players who buy-in using another currency does not make the Corporation a FXD/MC since the
Corporation is not giving the player currency per se but rather an opportunity to play in its gaming premises.
Also, the Corporation cannot be said to be in the business of foreign exchange dealing or money changing
since it will not derive profit from the conversion of currencies into another. Lastly, any actual foreign
exchange dealing or money changing will not be done by the Corporation itself; the Corporation will only
hold these currencies for the player.

Risk and Recommendation

The Corporation must ensure that the payout of the winnings or remaining balance of the player must be
through telegraphic transfer or wire transfer if the player requests that the payout be (i) in cash and (ii) in a
currency other than the one he/she used to buy-in. Otherwise, the Corporation opens itself to the risk that
the Central Bank might look at the overall transaction and consider it to be foreign exchange dealing or
money changing and therefore require the Corporation to register with them and/or subject the Corporation
to certain penalties. It would be prudent to institute this simple safeguard.