Crypto needs ‘enabling environment,’ Philippines central bank says

Crypto needs ‘enabling environment,’ Philippines central bank says

 

Amid the growing Digital Currency adoption in the Philippines, the country is central bank is seeking policy measures to better safeguard investors through elevating local Cryptocurrency awareness program.

 

The Philippine central bank, Bangko Sentral ng Pilipinas (BSP), wants to indorse cryptocurrency education and risk awareness as the regulatory authority sees a lot of advantages associated with Cryptocurrency and Blockchain Technology, a BSP representative said in an interview.

 

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“The BSP is focus is on digital assets’ ability to improve the delivery of financial services, particularly payments and remittances services, as it has the capability to provide faster and economical transfer of funds, both for domestic and international scenarios,” the BSP stated.

 

 

According to the BSP, Cryptocurrency adoption in the Philippines has increased over the past few years due to the COVID-19 pandemic and induced lockdown. As such, Bitcoin (BTC) retail trading volumes in the Philippines were hitting new highs on some peer-to-peer Cryptocurrency Exchanges in July 2021.

 

“During the COVID-19 pandemic, we have seen the inclination of consumers to explore the digital realm, particularly online platforms that promise to offer income-generating opportunities or play-to-earn applications,” the BSP representative said.

 

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In response to the growing adoption, the central bank does not plan to adopt any significant limits on Cryptocurrency investments or put trading limits at this point. Instead, the regulatory body is looking to implement a lawmaker is approach aimed at providing an “enabling environment” through “risk-based and proportionate regulations,” the central bank’s spokesperson said, adding that:

 

“The BSP will continue to enhance and expand our financial consumer awareness programs specifically designed to educate relevant stakeholders on digital currencies and assets, both as to advantages and the risks of investing involved.”

 

Despite targeting an “enabling environment” for digital assets, the BSP holds a highly negative viewpoint on using Cryptocurrency as a payment method. “Digital assets, particularly cryptocurrencies, whose prices are derived based on the agreement of the community of investors and traders, are not intrinsically designed to serve as legal tender,” the bank noted.

 

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According to the BSP, Digital Currencies cannot serve as a means of payment due to risks like high volatility and a high probability for unlawful use or theft due to increased anonymity and “weak cyber and digital identity security protocols.” Among other risks involved, the central bank mentioned that Cryptocurrency transaction irreversibility, which means that no central authority would ever be able to cancel a Bitcoin transaction or restore such funds.

 

The BSP also noted that the regulatory framework considers cryptocurrencies virtual assets rather than a currency. “Since the price of most digital assets is driven by speculation, digital assets expose users to price volatility and risk of losses,” the BSP further added. To address this, the regulatory body issued guidelines for Digital Asset service providers as part of Circular No. 1108 in January 2021.

 

The BSP still sees great potential and opportunities in utilizing technologies such as Blockchain Network to enhance the safety and efficiency of financial services in the the country. The central bank is currently looking at new methods for the issuance of a Central Bank Digital Currency (CBDC).

 

The BSP is preparing to undertake Project CBDCPh, a pilot project that will allow inter-institutional fund transfers utilizing a wholesale CBDC platform. According to the central bank, a retail CBDC is not highly appropriate for the nation in the near term.