The Philippine central bank sees the potential of crypto to improve domestic and cross-border payments, but the authority is still negative to crypto as a legal tender.
Amid the rising cryptocurrency adoption in the Philippines, the country’s central bank is seeking measures to better protect investors through elevating local crypto awareness.
The Philippine central bank, Bangko Sentral ng Pilipinas (BSP), wants to promote crypto education as the authority sees a lot of benefits associated with crypto and blockchain, a BSP representative said in an interview with Cryptowallcity.
“The BSP’s focus is on virtual assets’ capacity to improve the delivery of financial services, particularly payments and remittances services, as it has potential to provide faster and economical transfer of funds, both for domestic and international setting,” the BSP stated.
According to the BSP, crypto adoption in the Philippines has increased over the past few years due to the COVID-19 pandemic. As such, Bitcoin (BTC) trading volumes in the Philippines were hitting 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, particularly online platforms that promise to offer income-generating opportunities or play-to-earn applications,” the BSP spokesperson said.
In response to the growing adoption, the Philippine central bank does not plan to adopt any significant limits on crypto investments or trading at this point. Instead, the BSP is looking to implement a regulatory approach aimed at providing an “enabling environment” through “risk-based and proportionate regulations,” the central bank’s representative said, adding:
“The BSP will continue to enhance and expand our financial consumer awareness campaigns specifically designed to educate relevant stakeholders on virtual assets, both as to advantages and the risks involved.”
Despite targeting an “enabling environment” for crypto, the BSP holds a highly negative stance on using crypto as a payment method. “Virtual assets, particularly cryptocurrencies, whose values are derived based on the agreement of the community of users, are not intrinsically designed to serve as legal tender,” the bank noted.
According to the BSP, cryptocurrencies cannot serve as a means of payment due to risks like high volatility and a high potential for unlawful use or theft due to increased anonymity and “weak cyber and digital identity security protocols.” Among other risks, the bank mentioned crypto transaction irreversibility, which means that no central authority would ever be able to cancel a Bitcoin transaction or restore such funds.
The BSP also pointed out that the regulator considers cryptocurrencies 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 losses,” the BSP noted. To address this, the central bank issued guidelines for virtual asset service providers as part of Circular No. 1108 in January 2021.
The BSP still sees great opportunities in utilizing blockchain technology to enhance 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 is planning to undertake Project CBDCPh, a pilot project that will enable inter-institutional fund transfers utilizing a wholesale CBDC platform. According to the bank, a retail CBDC is not highly relevant for the country in the near term.