In the midst of the increasing adoption of cryptocurrencies in the Philippines, the country’s central bank is taking steps to ensure the protection of investors by promoting awareness of local crypto education.
The Bangko Sentral ng Pilipinas (BSP), also known as the Philippine central bank, believes that there are 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 enhance the delivery of financial services, particularly in the areas of payments and remittances. It sees cryptocurrencies as having the ability to facilitate faster and more cost-effective fund transfers, both domestically and internationally.
The BSP has observed a rise in crypto adoption in the Philippines over the past few years, largely influenced by the COVID-19 pandemic. As a result, Bitcoin trading volumes on some peer-to-peer crypto exchanges reached new highs in July 2021. The BSP attributed this increase to consumers’ willingness to explore online platforms that offer income-generating opportunities or play-to-earn applications during the pandemic.
In response to the growing adoption of cryptocurrencies, the BSP does not currently plan to impose significant restrictions 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, while the BSP strives to create an enabling environment for cryptocurrencies, it holds a strongly negative view on their use as a payment method. The bank argues that virtual assets, including cryptocurrencies, are not designed to serve as legal tender. It cites risks such as high volatility, potential for unlawful use or theft, increased anonymity, weak cyber and digital identity security protocols, and irreversible transactions as reasons why cryptocurrencies cannot effectively serve as a means of payment.
The BSP classifies cryptocurrencies as virtual assets rather than currencies, as their values are largely driven by speculation. This exposes users to price volatility and the risk of financial losses. To address these risks, the BSP issued guidelines for virtual asset service providers as part of Circular No. 1108 in January 2021.
Despite its reservations about cryptocurrencies, 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 a pilot project called Project CBDCPh, which aims to facilitate inter-institutional fund transfers using a wholesale CBDC platform. However, the BSP considers a retail CBDC to be less relevant for the country in the near future.