Category Archives: Bangko Sentral ng Pilipinas

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Philippine Central Bank Warns of Growing Crypto Use

Philippine Central Bank Warns of Growing Crypto Use

Local daily the Philippine Star has reported that the Philippines central bank has issued a warning regarding the risks brought about by the growing use of crypto in the Southeast Asian country.

Benjamin Diokno, governor of the Bangko Sentral ng Pilipinas, stated that the regulatory body would continue to monitor crypto use, especially its potential risk of use in terrorism funding.

Deputy governor Diwa Guinigundo also detailed the limitations of crypto in replacing traditional money as a medium of exchange and store of value. He explained that crypto and blockchain were effective in settlements but they also allowed users to circumvent restrictions by the banking system:

“For this reason, game theory dictates possible dysfunction when there is market breakdown, when everyone may distrust one another. There cannot be a total disregard for a central bank or a third party that provides lender of last resort facility.”

Guinigundo said that they encouraged innovation but urged to also run parallel to risk mitigation, and suggested the preference of central banks to maintain oversight of new tech in regulatory sandboxes.

The use of Bitcoin and crypto in the island archipelago has been rising in the past few years, with the central bank’s Technology Risk and Innovation Supervision Department recording USD 390 million in crypto transactions last year, up more than double the USD 189 million recorded in 2017.

These main involved trading between the national currency and other fiat currencies to crypto, but also included incoming remittances from overseas, facilitated through crypto. And they likely do not include other over-the-counter (OTC) trades from peer-to-peer platforms like LocalBitcoins.

According to CoinDance figures, trades on Localbitcoins in the Philippines have been on a steady increase since January, totaling USD 4.3 million in the last week alone.

 

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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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