Amid rising cryptocurrency adoption in the Philippines, the Bangko Sentral ng Pilipinas (BSP) says it sees great opportunities in utilizing blockchain technology to enhance the security and efficiency of financial services in the country. It also acknowledges the potential of cryptocurrency for improving domestic and cross-border payments.
However, the Philippine central bank said it is not yet ready to accept crypto as legal tender.
According to the BSP, cryptocurrencies cannot as yet 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. There’s also the issue of “weak cyber and digital identity security protocols.”
The BSP is thus exploring the issuance of a Central Bank Digital Currency (CBDC), an electronic form of central bank money that citizens can use to make digital payments and store value.
It is also planning to undertake Project CBDCPh, a pilot project that would enable inter-institutional fund transfers using a wholesale CBDC platform.
“A retail CBDC is not highly relevant for the country in the near term,” the BSP said in a statement.
Local crypto awareness and other measures needed to better protect investors
In line with this, the BSP is now pushing for the promotion of crypto education in the Philippines, with the authority also acknowledging all the benefits associated with crypto and blockchain technology.
“The BSP’s focus is on virtual assets’ capacity to improve the delivery of financial services, particularly on payments and remittances services, as it has the potential to provide faster and more economical transfer of funds, both for domestic and international setting,” said BSP chief Felipe Medalla.
According to Medalla, 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 are hitting new highs since July on some peer-to-peer crypto exchanges.
“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 chief added.
BSP: No plans (yet) to adopt crypto investments or trading
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 that is aimed at providing an “enabling environment through risk-based and proportionate regulations.”
“The BSP will continue to enhance and expand our financial consumer awareness campaigns which have specifically been designed to educate relevant stakeholders on virtual assets, both as to the advantages and the risks that are involved (in these assets),” the BSP noted.
Despite targeting an “enabling environment” for crypto, the BSP still holds a highly negative stance on using crypto as a payment method. The Philippine central bank remains firm on its stand that virtual assets, particularly cryptocurrencies whose values are derived based on the agreement of a community of users, are not intrinsically designed to serve as legal tender.
Among other risks, the BSP 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 they consider cryptocurrencies as virtual assets rather than as 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 has recently issued guidelines for virtual asset service providers as part of BSP Circular No. 1108.