The Bangko Sentral ng Pilipinas (BSP) and the Philippine Digital Asset Exchange (PDAX) are supporting the creation of a crypto-and-fintech sandbox that intends to spur innovation and technological advancement in this space. The move is also in response to the growing public interest in alternative investment platforms such as cryptocurrency, notably due to the clear shift from traditional to digital financial services.
During the recent virtual forum “The Philippine Financial Sector: Policy Perspectives and Trends,” which was held by the European Chamber of Commerce in the Philippines (ECCP) and the Fintech Philippines Association (FPA), Nichel Gaba, Founder and CEO of PDAX, one of the country’s largest and pioneering cryptocurrency exchanges, explained the importance of building what he called a regulatory sandbox for the digital asset space: “In a regulatory framework, a startup or an entity can test an idea rolling out a product to the market but within the parameters prescribed by a regulator. This framework or sandbox environment ensures that innovative initiatives flourish, while ensuring consumer protection, data privacy and cybersecurity, and that all such technology readily complies with applicable laws and regulations. The private sector and regulator can create an ecosystem for these initiatives.”
He also welcomed collaboration with the BSP in developing and launching initiatives that can increase public participation in the fintech and digital asset spaces while protecting their welfare. “The BSP is one of the global leaders in this space, and we are honored to work with them into nurturing fintech advancements that can help our public make worthy investments, build their income and savings, and plan for a secure future.”
BSP Governor Benjamin Diokno acknowledged that nascent financial technologies and the legal framework that supports it have to be cultivated in order to support the Philippine economy which has remained resilient despite the pandemic, and is expected to experience 6.5 to 7.5% growth by the end of the year. The banking sector itself remains robust with its industry assets also expected to grow by 6.1% year on year.
Governor Diokno affirmed that “as a result of the pandemic, we have seen an increase in use of the fintech platforms. The crisis has rapidly reshaped not just the financial system but also the way we interact and how we do business.” He cited as examples the recent surge in the volume of transactions of the two interbank fund transfer services that the government launched: Pesonet reaching P367 billion and Instapay climbing up to P177 billion by the end of 2020.
Amor Maclang, ECCP’s Innovations Committee Chairperson and FPA’s Executive Director, agreed with the Governor and made the observation that “despite the economic contraction, there is a newfound liquidity among consumers who are asking, ‘Where do I put my money so I can yield the best results?’ With the Philippines currently as the #3 country that is experiencing heightened activities and greater membership enrollment in crypto platforms, the demand has outpaced the system.”
Francesca Montes, UnionBank of the Philippines Vice President, mentioned that her company’s Bonds.ph gave another fintech investment option for the public: an app, running on blockchain technology, that enables its users to buy and sell Philippine retail treasury bonds.
BSP Deputy Governor Dr. Francisco Dakila Jr. said that, moving forward, the government financial institution will be providing both liquidity support and digital transformation in order to empower the private sector and their customer market to conduct safe user-friendly transactions that can spur both individual and organizational economic growth. Innovations like cryptocurrency, virtual bond trading, online fund transfer services, and soon artificial intelligence-powered financial advisors “will make financial transitions more popular to people. We are cooperating with the other government agencies to harmonize our regulations. This is our response to supporting digital innovations in the financial sector.”
Gaba also stressed the importance of the private sector’s cooperation with regulatory bodies especially as more and more digital services emerge and are adopted by the public. He said, “Our regulators have proactively fostered innovation. It’s often taken for granted how serious it is to service customers in the financial services industry. Capital requirements must always be high. The consumer protection standards must always be upheld. It’s incumbent on organizations like PDAX to step up to these requirements, whether in the form of sandbox or actual regulations.”