Philippines flexes regulatory muscle as cryptocurrency’s popularity rises

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When it comes to cryptocurrency, the Philippines gets it.

In February 2017, the Philippine central bank, or Bangko Sentral ng Pilipinas (BSP), released a set of regulations for domestic virtual currency exchanges, making the country the first in Asia to address the growing interest in the sector.

BSP, the sole authority that can issue money in the Philippines, has yet to regulate cryptocurrency. But the growing number of virtual currency remittances in the country has caused the central bank to become “concerned with potential money laundering and consumer protection.” The BSP’s answer was Circular No. 944, which “recognizes that virtual currency (VC) systems have the potential to revolutionize delivery of financial services, particularly for payments and remittance, in view of their ability to provide faster and more economical transfer of funds, both domestic and international, and may further support financial inclusion.”

The circular is a “pioneering regulation,” said BSP Deputy Director Melchor Plabasan in an ABS-CBN interview. And it’s one that has placed the Philippines on the map alongside countries—like Japan, which passed a law in March 2107 recognizing virtual currencies as method of payment—that are not terrified of “harnessing innovation.”

“It’s like any other financial instrument, monetary instrument… there are risks but essentially it can be managed… and if you want, let’s say, something that is fast, near real time and convenient, then there’s the benefit of using virtual currencies,” Plabasan said.

Since 2014, the central bank has been keeping close tabs on domestic cryptocurrency-related transactions. According to Plabasan, the Philippines is seeing an estimated $6 million in virtual currency transactions monthly, up from the $2 million-$3 million recorded between 2014 and 2015.

“That’s also one of the drivers for us, and a lot of virtual currency exchanges are positioning themselves as a remittance tool, cheap remittance mechanism,” Plabasan said.

Cryptocurrency’s underlying technology removes the need for a central exchange, which, in turn, puts a lot of governments that make their income by taxing the movement of money in a bind. Tech pioneer John McAfee explained it best when he said that “there’s no way you can create a law or to legislate something that will stop Bitcoin or any cryptocurrency because technically, you cannot.”

However, the cryptocurrency space still needs to have a regulated environment—preferably a self-regulated one—to prevent people from fraudulently taking money from other people, like in the case of Pluggle Inc, which has been flagged for “enticing the public to invest” sans authority. But the industry is still young and dealing with different issues, which is why regulations from central banks are at times, a welcome news.

“The main objective really of this circular is to balance the interest of harnessing innovation and at the same time, managing the attendant risks because we consider, let’s say, given the nature of Bitcoin and other virtual currencies, which is cross-border distributed, so the regulation is really focused on the activities related to the exchange of Bitcoin, so we target institutions that facilitate the exchange of virtual currency to fiat currency and vice versa. If you are an institution that is doing that activity, then you can be likened to a remittance company, remittance and transfer company, so it’s also our way of leveling the regulatory playing field because essentially they are performing money service business, and money service businesses are required to comply with our AML [anti-money laundering] regulations, technology risk management, consumer protection,” Plabasan said.