In light of the increasing adoption of cryptocurrencies in the Philippines, the country’s central bank is taking steps to protect investors by promoting crypto education and awareness.
The Bangko Sentral ng Pilipinas (BSP), the Philippine central bank, recognizes the numerous benefits associated with cryptocurrencies and blockchain technology. In a statement to Cointelegraph, the BSP stated that its focus is on the potential of virtual assets to improve financial services, particularly payment and remittance services. Cryptocurrencies have the potential to offer faster and more cost-effective fund transfers, both domestically and internationally.
Due to the COVID-19 pandemic, the adoption of cryptocurrencies in the Philippines has grown significantly in recent years. As a result, Bitcoin trading volumes on peer-to-peer crypto exchanges reached new highs in July 2021. The BSP noted that consumers have shown a willingness to explore online platforms that offer income-generating opportunities or play-to-earn applications during the pandemic.
To support the growing adoption of cryptocurrencies, the BSP does not currently plan to impose significant limitations on crypto investments or trading. Instead, the central bank aims to create a regulatory framework that provides an “enabling environment” through risk-based and proportionate regulations.
However, despite this supportive approach, the BSP maintains a highly negative stance on using cryptocurrencies as a payment method. The bank argues that cryptocurrencies, particularly virtual assets whose values are derived from user agreement, are not designed to be legal tender. The BSP highlights risks such as high volatility, potential for unlawful use or theft due to increased anonymity, and weak cyber and digital identity security protocols. Additionally, the irreversibility of crypto transactions poses a challenge, as no central authority can cancel a Bitcoin transaction or recover funds.
The BSP categorizes cryptocurrencies as virtual assets rather than currency, emphasizing that their prices are primarily driven by speculation. This exposes users to price volatility and the risk of losses. To address these concerns, the central bank issued guidelines for virtual asset service providers in January 2021 as part of Circular No. 1108.
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. The BSP believes that a retail CBDC is not currently highly relevant for the country.