BSP to public: Be wary of cryptocurrencies

MANILA, Philippines — The Bangko Sentral ng Pilipinas will continue to address the risks brought about by the growing use of virtual or cryptocurrencies in the country, according to BSP Governor Benjamin Diokno.

He said he is not fully convinced about the use of cryptocurrencies in the country since this could be used for terrorism financing. “I think that is my view. So we will go easy on that,” Diokno said.

Cryptocurrency is a type of virtual currency that uses cryptography – a method of storing and transmitting data in unreadable form so that only the intended recipients can read and process it. Bitcoin, introduced in 2009,  is the first and most popular cryptocurrency to date.

BSP Deputy Governor Diwa Guinigundo said there are limitations of bitcoins as substitute for fiat money in terms of being unit of account, medium of exchange, and store of value.

“Bitcoins are limited in use at this points, value is very volatile,” Guinigundo said during a recent launching of a book about bitcoins.

Guinigundo said blockchain and general forms of distributed ledger technology can be useful for payment and settlements for peer-to-peer transactions and therefore could potentially bypass the banks and banking system in general.

“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.

Guinigundo said the BSP approaches these new forms of technology based on regulatory sandboxes that would allow the regulator to balance encouraging technology innovation with robust solution and consumer protection.

Latest data from the BSP’s Technology Risk and Innovation Supervision Department showed the value of transactions involving virtual currencies almost doubled to $390.37 million last year from $189.18 million in 2017.

Conversion from peso and other currencies to virtual currencies with $208.27 million, conversion of virtual currencies into peso and other currencies with $173.33 million, and international inward remittance facilitated through virtual currencies with $8.77 million.

Following the rise in the use of virtual currencies for payments and remittances in the Philippines, the regulator established a formal regulatory framework for virtual currency exchanges through Circular 944 dated Feb. 6, 2017.

The circular required virtual currency exchanges to register with the BSP as remittance and transfer companies and were required to put in place adequate safeguards to address the risks associated with virtual currencies, including control measures to counter money laundering/ terrorist financing, technology risk management systems, and consumer protection mechanisms.

The BSP has so far approved the registration of 10 virtual currency exchanges including Bexpress Inc., Coinville Phils. Inc., ABA Global Phils. Inc., Betur Inc. (Coins.ph), Rebittance Inc., BloomSolutions Inc., Virtual Currency Philippines Inc., ETranss  Remittance International Corp., Fyntegrate Inc.and ZyBi Tech Inc.