The Bangko Sentral ng Pilipinas (BSP) has been asked to consider the creation of a disputes settlement body for cryptocurrency (or crypto) use despite the absence of real policy that cover crypto or digital money such as bitcoin in the country.
BSP director Melchor Plabasan for technology risk and innovation, while not directly addressing the recommendation, said the BSP is looking at the world of cryptocurrency as an “ever-evolving landscape” that has driven the central bank to be “vigilant, agile and open minded to new ways of thinking, regulating and even new ways of collaborating with the players.”
“Definitely we will continue to support fintech innovations coming from both startups and incumbent players while safeguarding our financial and payments system through our enabling policy and regulatory environment,” said Plabasan in a forum “Will crypto go mainstream in the Philippines?” hosted by the European Chamber of Commerce of the Philippines.
Lawyer J.J. Disini, managing partner at Disini Law Office, a known expert on technology and e-commerce law in the Phippines, has recommended that BSP, similar with the Philippine Clearing House Corp. for checques which has an informal alternative dispute resolution process, should also establish its own dispute resolution model for cryptocurrencies. Virtual money under existing BSP regulations are transacted via banks and fintech companies but it is not very clear how claims arising from disputes can be resolved, at the moment.
“I think there’s an important role that the BSP can stand in and try to create a dispute resolution model that allows these issues to be resolved much more quickly rather than having to go through lawyers like me (who will talk to other lawyers) and it becomes this web of confusion between entities. I think that can be smoothen out and once that can be resolved, it will be beneficial to customers and consumers,” said Disini during the online forum.
The country’s virtual currency exchanges or now called virtual asset service providers (VASP) or the bitcoin players, consider themselves “lucky” that the BSP was the first central bank in the world to have released a cryptocurrency-related regulation in 2017.
Disini said the BSP has an accommodating stance when it comes to bitcoin which is a cryptocurrency. The BSP has recognized it as beneficial not only to overseas Filipinos but also to the government’s financial inclusion initiatives. Given more chances to develop here, cryptocurrency’s potential talent pool can be a leverage.
This is where the BSP’s powers of intervention could come in when there are situations where entities that are regulated by the BSP and other agencies are locked in disputes. Disini said it is not very clear how the cooperation will happen between regulators such as the BSP and the Securities and Exchange Commission, for example in who will take charge in claims disputes between banks and fintechs.
“Blockchain technology is here to stay, whether any of these technologies are ready for primetime I think that is still being tested. There is a technological challenge that is ahead of all of us,” said Disini. “The other issue is government has still not made its decision. Central banks have not really made their decision about what to make about on all of this and I think the hesitation to issue CBDCs (central bank digital currency) is a reflection of that.”
One of the reasons why most central banks are not yet prepared to issue CBDCs – which is more secure than cryptocurrency — is the unknown impact of a potential massive expansion of monetary supply. “You could say that is a signal of the weakness of central banks in trying to control monetary policy. If they see the crypto space as a challenge to that there might be a regulatory response that might have an impact across the board and I’d rather not see that,” said Disini.
“We need to be cautiously optimistic,” he added. “I am bullish on all of these things but we also have to watch (that) the traditional central banks will be looking at doing this in the future.”
Nichel Gaba, CEO of PDAX, said in the world of cryptocurrency, it is money laundering that is a specific problem. Cyber criminals are engaged in a form of money laundering. “Not just in crypto but in financial services in general. Perhaps quite unfairly, cryptocurrencies have had a reputation as tool for money laundering but not because crypto is inherently bad as technology but because rules were not yet in place at the time that crypto first rose.”
In the last five years, the Financial Action Task Force has released anti-money laundering (AML) rules on cryptocurrency that Gaba said are clearer and more enforceable. “We should be seeing cryptocurrencies used more towards inclusion, innovation, rather than for any activities that were not legitimate in the past. So, the space is definitely cleaning up, thanks to greater clarity in AML rules.”
Union Bank of the Philippines’ Henry Aguda, chairman of UBX Philippines, said in the Philippines, he has no doubt that cryptocurrency is here to stay.
“Is crypto mainstream? Not yet but my firm belief is it will be, same there as digital payments,” said Aguda in the forum. He noted that there has been an increase in the number of institutional investors that are beefing up their crypto portfolios.
Aguda also said that with the BSP’s initial rules on VASPs, cryptocurrency is not just a speculative play for investors, it has other uses and this is why central banks including the BSP is preparing the financial system for an eventual CBDC.
For the BSP, issuance of CBDCs will depend on a lot of things such as how far developed the financial market here is and the demand for CBDCs. Other factors also include cash usage and the public acceptance and use of privately-issued digital currencies.