In the midst of the increasing adoption of cryptocurrencies in the Philippines, the country’s central bank is taking steps to safeguard investors by promoting awareness and education about crypto.
The Bangko Sentral ng Pilipinas (BSP), also known as the Philippine central bank, recognizes the numerous benefits of crypto and blockchain and aims to improve the delivery of financial services, particularly payments and remittances, through virtual assets. The BSP believes that cryptocurrencies have the potential to facilitate faster and more cost-effective fund transfers, both domestically and internationally.
The COVID-19 pandemic has played a significant role in driving the adoption of cryptocurrencies in the Philippines. In July 2021, Bitcoin trading volumes on peer-to-peer crypto exchanges reached new highs, thanks to consumers’ willingness to explore online platforms that promise income-generating opportunities or play-to-earn applications.
Rather than imposing significant restrictions on crypto investments or trading, the BSP intends to create a regulatory environment that enables crypto activities. The central bank plans to implement risk-based and proportionate regulations to ensure a conducive environment for crypto businesses.
However, despite its supportive stance towards crypto, the BSP remains skeptical about using cryptocurrencies as a means of payment. The bank emphasizes that virtual assets, including cryptocurrencies, are not designed to be legal tender due to their high volatility, potential for unlawful use or theft, and weak cyber and digital identity security protocols. Additionally, the irreversibility of crypto transactions poses a challenge, as there is no central authority to cancel or restore funds in case of fraudulent activity.
The BSP classifies cryptocurrencies as virtual assets rather than currencies, as their prices are primarily driven by speculation. The bank acknowledges the risks associated with price volatility and potential losses for users. To address these concerns, the BSP issued guidelines for virtual asset service providers under Circular No. 1108 in January 2021.
Despite its reservations about cryptocurrencies as a payment method, the BSP recognizes the potential of blockchain technology to enhance the security and efficiency of financial services in the Philippines. The central bank is currently exploring the possibility of issuing a central bank digital currency (CBDC). It plans to undertake Project CBDCPh, a pilot project that will facilitate inter-institutional fund transfers using a wholesale CBDC platform. However, the BSP believes that a retail CBDC is not currently relevant for the country.
Overall, the BSP aims to strike a balance between promoting crypto adoption and safeguarding investors through appropriate regulations and awareness programs.