Crypto needs an “enabling environment,” says the central bank of the Philippines
Amid the growing use of cryptocurrency in the Philippines, the country’s central bank is seeking measures to better protect investors by raising local awareness of cryptocurrency.
The Philippine central bank, Bangko Sentral ng Pilipinas (BSP), wants to promote crypto education as the authority sees many benefits associated with crypto and blockchain, a BSP representative said in an interview with Cointelegraph.
“BSP’s focus is on the capacity of virtual assets to improve the delivery of financial services, particularly payment and remittance services, as it has the potential to provide faster and more economical transfer of funds, both for domestic and international settings,” the BSP stated.
According to the BSP, crypto adoption in the Philippines has increased in recent years due to the COVID-19 pandemic. As such, Bitcoin (BTC) trading volumes in the Philippines hit new highs on some peer-to-peer crypto exchanges in July 2021.
“During the pandemic, we have seen the willingness of consumers to explore the virtual realm, especially online platforms that promise to offer income-generating opportunities or games to earn applications,” the BSP spokesperson said.
In response to the growing adoption, the Philippine central bank does not plan to enact any significant limits on crypto investment or trading at this time. Instead, the BSP is looking at implementing a regulatory approach that aims to provide an “enabling environment” through “risk-based and proportionate regulations,” the central bank representative said, adding:
“BSP will continue to improve and expand our financial consumer awareness campaigns specifically designed to educate relevant stakeholders about virtual assets, both regarding the benefits and risks involved.”
Despite aiming for an “enabling environment” for crypto, the BSP has a very negative attitude towards the use of crypto as a payment method. “Virtual assets, especially cryptocurrencies, whose values are derived based on the consent of the user community, are not inherently designed to serve as legal tender,” the bank noted.
According to the BSP, cryptocurrencies cannot serve as means of payment due to risks such as high volatility and a high potential for illegal use or theft due to increased anonymity and “weak cyber and digital identity security protocols.” Among other risks, the bank cited the irreversibility of crypto transactions, meaning that no central authority will ever be able to cancel a Bitcoin transaction or recover such funds.
The BSP also pointed out that the regulator considers cryptocurrencies as virtual assets rather than a currency. “Since the price of most virtual assets is driven by speculation, virtual assets expose users to price volatility and risk of loss,” BSP noted. To address this, the central bank issued guidelines for virtual asset service providers as part of Circular No. 1108 in January 2021.
Related: Philippines halts license applications for virtual asset providers
The BSP still sees great opportunities in using blockchain technology to improve the security and efficiency of financial services in the Philippines. The central bank is currently exploring the issuance of a central bank digital currency (CBDC).
The BSP plans to implement Project CBDCPh, a pilot project that will enable inter-institutional fund transfers using a wholesale CBDC platform. According to the bank, a retail CBDC is not particularly relevant for the country in the short term.
