An economist and soon-to-be governor of Bangko Sentral ng Pilipinas (BSP) has expressed apprehension about regulating cryptocurrency, saying that the virtual asset is a scary investment.
Incoming BSP governor Felipe M. Medalla issued the statement after he was asked if new taxes on crypto would follow under the new leadership. “It is just based on the greater fool theory, and the only reason you are using them (cryptocurrency) is because you think somebody else will buy it from you at a higher price,” he said. “That’s a very scary investment,” he added.
Cryptocurrencies in the Philippines are classified as digital or virtual assets, and the BSP does not regulate them itself. However, there are guidelines that virtual asset service providers must follow. Under existing rules, entities that engage in virtual assets are required to secure a license first from the Philippine central bank.
A member of the Monetary Board, Mr. Medalla also downplayed the idea of investing in cryptocurrencies. He said that it is only valuable to those who want to hide their money from the government.
“This is a new tool that adds to an individual’s ability to do that,” Mr. Medalla said. “My view is that the moment you cross from the virtual world to the fiat and physical world, you have to have KYC (Know Your Customer) policies and apply the same anti-money laundering policy.”
KYC refers to the process that institutions use to verify the identity of their clients and to ascertain risks of fraud that they may pose. This could keep money laundering, terrorism financing, and similar other types of unlawful financial activities in check.
BSP to issue its own digital currency
The BSP is currently working on a pilot test project among selected financial institutions on the use of wholesale Central Bank Digital Currency (CBDC) for large-value financial transactions.
The pilot project currently covers experimentation on the use of CBDCs to transfer large-value financial transactions on a 24/7 basis across a limited number of financial institutions. This could soon cover both banking and non-banking institutions.
Data showed that transactions in virtual currency, including cryptocurrency, have surged by 71% to reach P105.93 billion in the first semester of 2021. The BSP chose to focus on the wholesale aspect of CBDCs as it assessed that it will have a bigger impact compared with retail use cases.