Amid growing cryptocurrency adoption in the Philippines, the country’s central bank is seeking measures to better protect investors by raising local crypto awareness.
The Philippine central bank, Bangko Sentral ng Pilipinas (BSP), wants to promote crypto education as the authority sees many benefits associated with crypto and blockchain, the BSP said in a statement to Cointelegraph.
“The focus of the BSP is on the ability of virtual assets to improve the provision of financial services, in particular payment and remittance services, as it has the potential to provide a faster and cheaper transfer of funds, both for the environment nationally and internationally”, affirmed the BSP.
According to the BSP, the adoption of cryptocurrencies in the Philippines has increased in recent years due to the COVID-19 pandemic. As such, Bitcoin (BTC) trading volumes in the Philippines hit new highs on some peer-to-peer crypto exchanges in July 2021.
“During the pandemic, we have seen consumers’ willingness to explore the virtual realm, particularly online platforms that promise to offer revenue-generating opportunities or gaming apps to win,” the BSP said.
In response to growing adoption, the Philippine central bank is not planning to adopt any significant limits on cryptocurrency investments or trading at this time. Instead, the BSP is seeking to implement a regulatory approach aimed at providing an “enabling environment” through “proportionate and risk-based regulations,” the central bank, stati, said:
“The BSP will continue to enhance and expand our financial consumer awareness campaigns designed specifically to educate relevant stakeholders about virtual assets, both in terms of the benefits and risks involved.”
Despite pointing to an “enabling environment” for cryptocurrencies, the BSP has a very negative stance on the use of cryptocurrencies as a payment method. “Virtual assets, in particular cryptocurrencies, whose values are derived from user community agreement, are not inherently designed to serve as legal tender,” the bank noted.
According to the BSP, cryptocurrencies cannot serve as a means of payment due to risks such as high volatility and a high potential for illegal use or theft due to increased anonymity and “weak cyber and digital identity security protocols.” Among other risks, the bank mentioned the irreversibility of crypto transactions, meaning that no central authority would be able to cancel a Bitcoin transaction or restore said funds.
The BSP also noted that the regulator considers cryptocurrencies to be 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 loss,” 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.
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The BSP still sees great opportunities in utilizing blockchain technology to improve 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 plans to undertake the CBDCPh Project, a pilot project that will enable inter-institutional fund transfers using a wholesale CBDC platform. According to the bank, a retail CBDC is not very relevant for the country in the short term.