Amid the growing adoption of cryptocurrency in the Philippines, the country’s central bank is seeking measures to better protect investors by raising awareness of local cryptocurrencies.
The central bank of the Philippines, Bangko Sentral ng Pilipinas (BSP), said in a statement to Cointelegraph that the authority sees a lot of benefits associated with crypto and blockchain.
“Bill Settlement Payments (BSP) focus is on the ability of virtual assets to improve the delivery of financial services, particularly payments and remittance services, as they can provide faster and economical transfer of funds, both domestically and internationally.
According to BSP, cryptocurrency 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 consumers’ willingness to explore the virtual world, particularly online platforms that promise to offer revenue-generating opportunities or gaming apps to earn,” BSP said.
In response to increased adoption, the Central Bank of the Philippines does not plan to adopt any significant restrictions on crypto investments or trading at this point. Instead, the Billing Settlement Payment Program (BSP) is looking to implement a regulatory approach that aims to provide a “favorable environment” through “risk-based and proportionate regulations,” as the central bank said:
“BSP will continue to enhance and expand financial consumer awareness campaigns specifically designed to educate relevant stakeholders about virtual assets, both regarding the benefits and risks involved.”
Despite targeting an “enabling environment” for cryptocurrencies, BSP has a very negative stance on the use of crypto as a payment method. The bank noted that “virtual assets, especially cryptocurrencies, whose values are derived based on the consent of the user community, are not intrinsically designed to serve as legal tender.”
According to the BSP, cryptocurrencies cannot function as a means of payment due to risks such as high volatility and a high possibility of illegal use or theft due to increased anonymity and “weakening of electronic and digital identity security protocols.” Among other risks, the bank stated that there is no irreversibility in crypto transactions, which means that no central authority will ever be able to cancel a Bitcoin transaction or get those funds back.
The BSP also noted that the regulator considers crypto-virtual assets rather than currency. “Because the price of most virtual assets is driven by speculation, virtual assets expose users to price fluctuations and the risk of losses,” BSP noted. To address this matter, the Central Bank issued guidelines for virtual asset service providers as part of Circular No. 1108 in January 2021.
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BSP continues to see significant opportunities in using blockchain technology to enhance the security and efficiency of financial services in the Philippines. The central bank is currently considering issuing a central bank digital currency (CBDC).
BSP plans to implement the CBDCPh project, a pilot project that will enable the transfer of funds between institutions using the wholesale CBDC platform. According to the bank, the retail central bank digital currency is not very relevant to the country in the near term.