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Why Crypto is Booming in the Philippines

Why Crypto is Booming in the Philippines

The Philippines is having a moment with cryptocurrency, which largely can be attributed to the country’s own political leadership.

A combination of the Filipino government and the central bank, the Bangko Sentral ng Pilipinas (BSP), have a lot to do with the growing pro-Bitcoin sentiment in the Asian country. Indeed, for the nation’s authorities, cryptocurrency may well prove to be a way to modernize digital payment systems, fitting in well with the schemes already established.

Bitcoin trading volumes have increased

Data shows that Bitcoin’s trading volume on LocalBitcoins has increased significantly, with the predominant turning point back in December 2017 in the heat of the bull run. Trading volumes have continued to rise since then, showing a weak but definite correlation with the cryptocurrency’s price.

The week claiming the highest trading volume commenced 15 September 2018 when Bitcoin benefited from a two-day market surge, reaching USD 6,400.

While transactions in the last few months have slowed down on LocalBitcoins, this is most likely because there are now more authorized cryptocurrency exchanges for Filipino’s to use.

Crypto fits in with the government’s fintech scheme

Providing a solid regulatory framework for cryptocurrency seems to be key for the Filipino government as part of its larger plan to modernize the nation’s digital payment systems. Governor of BSP, Benjamin Dioknoof, recently noted that the 2016 National Payment Systems Act “bolsters the central bank’s capacity to foster the efficiency of payment systems as pipelines of funds in the financial market.”

Vice president and senior credit officer with Moody’s Sovereign Risk Group in Singapore, Christian de Guzman, commented on the Filipino government’s approach towards cryptocurrency, saying that regulation efforts are part of a wider attempt to facilitate electronic payments. ”I think that’s a key point,” he added.

The number of regulated exchanges is growing

Last week the tenth cryptocurrency exchange in the Philippines was granted approval to operate by BSP. The most recent group of approved exchanges include Bexpress Inc., Coinvillel Phils Inc., and Aba Global Philippines Inc.

But cryptocurrency exchanges can operate legally in the Philippines without the green light from the central bank by obtaining an offshore license from the government-owned Cagayan Economic Zone Authority (Ceza). With Ceza-approved exchanges counted, this brings the total up to 29 legally operational cryptocurrency exchanges in the country.

The itch to join in with the cryptocurrency action has been felt by the mainstream banking sector; one of the largest banks in the country, Union Bank of the Philippines (UBP), has even installed a Bitcoin ATM machine at one of its main branches, receiving permission from BSP to do so. All you need to use the machine is a UBP account and a Bitcoin wallet.

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Bank Of Mexico Further Complicates Its Crypto Rules

Mexico’s Central Bank has published new crypto related rules which has left many industry players confused as to the ramifications of the new provisions.

The new rules which were published by the central bank in the federations official gazette before the weekend stated that the Bank of Mexico (Banxico) “stipulated that they wouldn’t authorize any cryptocurrency to be offered by regulated financial companies.”

The confusion lies in the fact that fintech law brought in 12 months ago simply requires exchanges to put in an application for an operating license. Toma Alvarez, CEO of Mexican exchange Volabit explains how that law operates:

“This law stipulates that services that hold custody of users’ fiat money or cryptocurrencies (most brokers and exchange business models require this) have to apply for a license issued by the Mexican equivalent of the SEC (CNBV).”

Alverez adds that the idea at the time was that the responsibility would be with the central bank to determine which cryptocurrencies were to be offered by the regulated companies and come up with a workable framework to facilitate this. The new ruling is in complete contradiction to this.

A catch-22 scenario now exists as a result because the law requires you to become a regulated financial institution (otherwise you would be operating illegally). However, once you obtain this license, you would not have the authorization to list cryptocurrencies, thereby making it legally impossible to operate an exchange in Mexico under the new law. The Central Bank explains:

“Institutions may only enter into transactions with virtual assets that correspond to internal transactions, subject to the prior authorization granted by the Bank of Mexico.” and adds, “They will not be eligible for obtaining the authorization” to directly provide their clients with cryptocurrency exchange, transmission or custody services.

Alvarez explained that exchanges are awaiting further clarification as to how this impasse might be overcome for current exchanges and comments:

“Fintech companies in Mexico are operating with a special waiver until the process for registration is ready thus allowing companies to register for the license. This will happen in around 6 months.”

However how useful this license will be when issued remains to be clarified. This is not the first punitive ruling affecting the industry after financial entities were required to identify customers involved in cryptocurrency trading late last year.

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Major Bank in Russia Announces Partnership with Energy Giant to Propagate Blockchain

The largest majority state-owned bank in Russia, Sberbank, revealed details of a partnership with major state-run power company Rosseti, which includes the promotion of emerging technologies such as blockchain.

Together, the pair plan to collaborate on a number of projects with the joint aims of advancing blockchain in Russia, and developing their own internal expertise. A press release detailing the partnerships reads that they will work on educational projects and research trials with one another.

The strategic partnership is a significant move from Russia as it continues to pursue a leading place in the nascent technological field through its various company arms. In this instance, it seems to be using the collaboration as a means of sharing information and progress.

Part of the agreement states that Sberbank will supply Rosseti with a consultant to increase general efficiency and performance, alongside access to the bank’s ”innovative laboratory developments” and its full ecosystem of products.

Apart from sharing its blockchain data, Sberbank will provide Rosseti with its experience and developments in the field of the internet of things (IoT), business process automation, robotics, VR / AR, big data, and artificial intelligence (AI).

Sberbank was one of two financial institutions behind the launch of Russia’s first cryptocurrency investment fund in July 2018, that came as part of the Russian central bank’s ‘regulatory sandbox’ initiatives. Bitcoin, Bitcoin Cash, Ethereum and Litecoin will form an investment portfolio of digital financial assets for the banks to experiment with.

Bitcoin News reported last week on the disappointment from experts surrounding the current content of Russia’s long-awaited cryptocurrency regulatory bills.

Artem Tolkachev, chairman of the Russian Blockchain community claimed that as it stands now, the bill leaves much room for inefficiencies, in part due to the fact that crowdfunding section and the Russian Civil Code were written by different entities, and the contents conflict with each other.

 

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Singapore’s Central Bank Doesn’t Think Tokens are Securities

Singapore’s central bank, the Monetary Authority of Singapore (MAS), has said that cryptocurrency tokens do not fall under the definition of securities.

Speaking at CoinDesk’s Consensus Singapore 2018 conference Wednesday, Damien Pang, who heads the MAS’s technology infrastructure office for fintech and innovation, said that after carefully analyzing the nature of tokens, the bank will not regulate them as securities.

This is because utility tokens that are used to enable access to specific services do not share the same characteristics as securities that promise future earnings to investors, Pang explained. If tokens do begin to reflect the nature of securities in the future, Singapore’s central bank will choose to regulate them.

He made a point to highlight that every jurisdiction has a different definition of what defines an asset as a security and that it is to be expected for the US Securities and Exchange Commision to reach a different conclusion than Singapore’s regulators.

By the end of the year, MAS hopes to have enacted a payments service bill that will be applied to tokens that have ”storage and payment values.”

Pang spoke more to the audience about MAS’s 2017 guidelines for cryptocurrency startups, “A Guide to Digital Token Offerings“, which divides tokens into three categories depending on their use case. These comprise of utility tokens, payments tokens, and securities tokens.

While he currently stands by MAS’s stance, he acknowledged that the industry is ever-changing, and depending on the future direction it takes, regulations may be applicable at a later time.

When Pang was asked why the central bank does not call out specific tokens or companies for going against the state law, he replied saying that would quite possibly create an environment detrimental to positive development: “The moment you start naming names, people take it very literally – these are and those are not. But in fact, there are more than 1,000 tokens.”

 

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Bank of Russia Reports Successful ICO Experiment

The deputy director of the Bank of Russia (BoR) has said that the central bank’s initial coin offering (ICO) trial experiment was a ”technical” success.

Local news outlet TASS reports that Ivan Semagin relayed the message during the Eastern Economic Forum in Vladivostok, Russia on Monday. Semagin detailed to the forum attendees that BoR held the trial ICO to test the existing infrastructure of the bank’s sandbox.

While he was happy to relay the good results that ”technically everything went well”, he did add that from a legal standpoint, the experiment brought up several issues. The deputy director refrained from sharing any of these legal concerns with the crowd, however, despite the importance of these nuances for startups looking to hold their own coin offerings.

The experiment was a collaborative effort between Russia’s largest state-funded retail bank, Sberbank, and the country’s National Settlement Depository (NSD) on BoR’s regulatory platform that was developed to be used in ICO-style fundraising rounds. The ICO issuer, in this case, was a company called Level One, which manages online lecture tutorials.

BoR’s regulatory platform was itself launched in April this year, with this trial scheduled to test the logistics before it can be rolled out for use by local businesses. Its ambition was declared as helping to rapidly introduce new financial services and technologies that require legal regulations.

It was developed with the input and cooperation of interested state bodies, profile associations and development institutions.

Blockchain voting

Russian officials last month shared that the state has been experimenting with a blockchain-backed electronic voting system, an increasingly popular solution for countries with a poor history of democratic elections.

Unsurprisingly, the notoriously opaque government of Russia have shared no technical details of the proposed system with the public as of yet. The federal coordinator of National Public Monitoring Fedor Kolomoystsev said to reporters: “As part of our congress, we are launching in the test mode an electronic voting system [in elections], which is built on a blocking system.”

 

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India Investigates Replacing Smart Travel Cards with Crypto Tokens

The Indian government is currently in the midst of reviewing the viability of substituting smart travel cards for its own central-bank issued crypto tokens.

A senior official from the country’s finance ministry and a member of the committee undertaking applicability research for the crypto token said that the committee is currently researching the use of a custom blockchain-backed crypto token to replace smart cards in the public sector, such as the metro card.

Also in the private sector, they are looking to include the tokens in such areas as air mile loyalty programs where they cannot be converted back into fiat money, he said.

The Inter-Ministerial Committee (IMC) was first established early last year by the Ministry of Finance and constitutes members from India’s taxation authority and India’s Department of Economic Affairs (DoEA), as well as representatives from India’s central bank, the State Bank of India, and several other government departments.

The IMC has also been charged with producing a regulatory road map for the cryptocurrency space and is responsible for determining the usability of crypto tokens in the public sector, partly by studying international and governmental policies and legal framework regarding cryptocurrency.

The committee has been requested to find specific measures used by governments to curb money laundering activities via crypto.

India’s own crypto token

As reported by Bitcoin News on Monday, the Indian government is in the midst of implementing a crypto token specifically for financial transactions, stressing this as different to cryptocurrencies which are currently all banned in the country.

The tokens would differ specifically from cryptocurrencies as they would be a means of executing financial transactions exclusively in India.

The president of the Digital Lenders Association of India detailed that people would have to pay for these tokens with physical money should they be instituted, removing any impact on the country’s monetary policy.

 

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South African Central Bank Refers to Cryptocurrencies as “Cyber-Tokens” Ahead of Regulation Review

The Central Bank of South Africa prefers to name cryptocurrencies as “cyber-tokens,” despite having no stated regulations or policies in place for cryptocurrencies.

As reported by Bloomberg, May 24th, Francois Groepe, South African Reserve Bank (SARB) Deputy Governor said in Pretoria “We don’t use the term ‘cryptocurrency’ because it doesn’t meet the requirements of money in the economic sense of the stable means of exchange, a unit of measure and a stable unit of value. We prefer to use the word ‘cyber-token.”

A Slow Start

In early April, the SARB has however put together a fintech team that will investigate cryptocurrencies with the aim of creating regulatory and legal frameworks from the findings. Groepe added, “We want to ensure or establish whether there is still compliance with the relevant financial surveillance or exchange-control regulations,”

The problem is that the SARB doesn’t presently regulate or supervise cryptocurrencies; though due to the ever-increasing interest in cryptocurrencies it is imperative that the matter is addressed sooner than later.

The timely investigative unit should bring to light a means to move forward without damaging the industry in South Africa, and according to the SARB’s banking practice director, Bridget King, the move has not come too late.

Finextra Reported her saying: “Regulating cryptocurrencies prematurely could have the negative consequence of throttling the growth and innovation of the industry… In addition, if laws are drafted based on existing technology, which is still in its growth phase, there is a risk that the technology may have moved so much by the time the legislation is enacted, that the legislation is obsolete or requires updating almost immediately to align with the latest technology.”

Industry growth hasn’t necessarily been completely thwarted in South Africa; a Cape Town-based company worth around $14.5 billion is expected to introduce a new cryptocurrency exchange in the country, though due the regulations being unclear, the new company will follow the frameworks set in place for platforms in New York.

Following the Investigation

It is not particularly clear as to why the SARB heavyweight made such comments prior to the findings of the research, though his statements echo that of the Bank of England Governor, Mark Carney, who in February made declarations that Bitcoin is unable to be considered a currency by any “traditional” standards.

The investigative unit ‘Project Khoka’ will be examining distributed ledger technology as a means to make secure electronic payments, to do so the bank is to launch a proof-of-concept using the Ethereum blockchain to test interbank clearing and settlements.

It is wise to approach any new system with caution, especially for financial institutions though there are many countries around that are many leagues ahead when it comes to the classification and regulation of cryptocurrencies.

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Zimbabwe Bans Cryptocurrency Trading

Zimbabwe has issued instructions to all financial institutions in the country to move away from any partnerships, relationships, or associations with all cryptocurrencies, according to a local news source.

The Reserve Bank of Zimbabwe registrar Norman Mataruka said these precautions were issued to protect the general public, as well as concerns for the country’s financial infrastructure. The institutions have 60 days to cut off ties and liquidate account balances.

“As monetary authorities, the Reserve Bank of Zimbabwe is the custodian of public trust and has an obligation to safeguard the integrity of payment systems,” said Mataruka.

This was further specified into any enterprises that maintained accounts, registered, traded, cleared, had collateral agreements, sent remittances, had payment and settle accounts, and gave loans against virtual tokens.

While the statements don’t affect personnel that wish to handle cryptocurrency, central bank governor John Mangudya in a separate statement advises against it:

“Any person who buys, sells, or otherwise transacts in cryptocurrencies, whether online, or otherwise, does so at their own risk and will have no recourse to the Reserve Bank or to any regulatory authority in the country,” he said.

Mangudya continued, talking about companies like Styx24, and Bitfinance, popular cryptocurrency exchanges in Zimbabwe:

“The Reserve Bank of Zimbabwe has not authorised or licensed any person or entity or exchange for the issuance, sale, purchase, exchange or investment in any virtual currencies/coins/tokens in Zimbabwe. Exchanges such as Bitfinance (Private) Limited (Golix) and Styx24 are not licensed or regulated by the Reserve Bank.”

Bitcoin gained popularity in the country last year, due to increasing inflation coupled with frustrating capital controls that prevented people from using money domestically, and restricted remittances outside of their borders.

Last year, Zimbabwe experienced a military takeover at the highest level, further shaking people’s trust in the government. The combination of hyperinflation, political instability, and restricted liquidity, were key factors in driving demand to Bitcoin and other cryptocurrencies.

With Zimbabwe trading Bitcoin at a premium compared to the rest of the world, it will be interesting to see how these events layout in the market.

 

 

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