Is the Philippines on its way to becoming a crypto hub?
The Philippines has finally moved blockchain to the top of its political agenda. The country’s central bank has seen a massive increase in crypto adoption in recent years due to the Covid-19 pandemic.
The long period of isolation exposed the Philippines’ growing middle class and tech-savvy millennials to the concept of digital tokens through popular blockchain-based games such as Axie Infinity. At one point, 40% of players in the game, which generated $1.3 billion in revenue last year, were reportedly based in the Philippines.
Likewise, Bitcoin trading volumes hit new highs on some peer-to-peer crypto exchanges in July this year. The volume of cryptocurrency transactions grew by 362% year-over-year to nearly 20 million in the first half of 2021. These transactions were worth P105.93 billion, or approximately US$1.82 billion.
The Philippines is now also second in Chainalysis’ Global Crypto Adoption Index 2022 – behind Vietnam and ahead of Ukraine, India and the US. According to Chainalysis, the index is a “measure of where most people spend the largest portion of their money in cryptocurrency….the countries where individual, non-professional investors embrace digital assets the most.”
In response to the Philippines’ growing embrace of crypto, the Banko Sentral ng Pilipinas (BSP) announced that it would launch a wholesale central bank digital currency (CBDC) project scheduled for the last quarter of 2022, stating that crypto may have the potential to improve domestic and cross-border payments and can help increase the country’s recovery from the ongoing crisis. This is in line with the goal of converting 50% of payments to digital by 2023.
The BSP has also started working with solution providers to monitor and track financial institutions using blockchain and cryptocurrency in their operations, signaling the growing acceptance of blockchain technology in finance and thus the demand to build a better framework.
Blockchain advocates also welcomed President Ferdinand Marcos Jr.’s announcement during his annual address, where he emphasized the need to adopt new technologies that could eventually facilitate crypto adoption to expand further soon.
But the way forward for blockchain and crypto in the Philippines is not entirely clear. Regulators, legislators and market participants have expressed conflicting views. Consensus remains elusive and may remain so until the impact of blockchain and crypto innovation is better understood.
Regulators in the Philippines still consider cryptocurrency virtual assets rather than legal tender. Starting this month, the BSP has also imposed a moratorium on new license applications for virtual asset providers that will last for three years. It is understandable that the BSP wants to protect the public by ensuring that the crypto companies operating in the Philippines are all licensed, but if this continues without sufficient regulatory clarity, the Philippines may lose out on future projects as companies and investors turn to other, more crypto industry-friendly nations .
Despite these obstacles, the Philippines is on its way to becoming a new blockchain hub due to the strong support of Filipinos and large companies taking the leap and adapting to the technology.
We see that some of our legislators are proposing to have a technical task force to work on the taxation of both cryptocurrencies and NFTs (non-fungible tokens). We are also looking at the Bataan initiative, where they are leading the way to become the local crypto zone.
Another sign that the Philippine government is trying to welcome crypto more is the project to make the Philippines’ Cagayan Valley the “Crypto Valley of Asia” via a $100 million plan to establish a hub for fintech and crypto-related businesses in the region . The project aims to emulate Zug in Switzerland, the birthplace of Ethereum and home to around 200 blockchain companies. Crypto Valley is known for its encouragement of cryptocurrency, even allowing blockchain-based e-voting for Swiss elections.
Despite the bearish market, we see many events and projects happening or about to happen this year. However, there is a gap that must be filled to pave the way to financial sovereignty and opportunity for all.
A holistic approach to targeting a crypto-enabling environment and achieving these nodes is to address the challenge of blockchain: education. Key players need to step up their gameplay when it comes to educating people around, including developers and those who will be the champions of pushing this within the government in the near future.
Collaboration is also essential to validate that blockchain and Web3 are promoted in the right way. Large and small industry players must always keep each other in check to ensure that real solutions are delivered.
To address the knowledge gap in this area, crypto and blockchain advocates are now teaching the ins and outs of digital assets and blockchain in the Philippines’ regional languages to help increase financial literacy and protect people from fraud.
But ultimately, the key to building the Philippines as Asia’s next blockchain hub will lie in an agile and forward-looking regulatory framework that focuses on ensuring a more level playing field with respect to financial services provided by established financial institutions and emerging startups. system. The seeds are sown, but no seed will become a tree and bear fruit in just a few days. While we wait for better weather, transparency and the free flow of information will be necessary to ensure innovation, growth and security.
