Taxation on cryptocurrencies should be friendly enough so as not to kill the still evolving industry in the country, according to an industry expert.
Emman Navalam, CEO and co-founder of Tetrix Network, an interconnected ecosystem that aims to bridge the gap among all blockchain projects, said that a bill or legislative measure that may be crafted on cryptocurrency taxation should be crafted in a way that it will be “crypto-friendly.”
Navalam cited India’s 30 percent tax on crypto which he said would kill the industry. “They have to really make sure that it’s something that’s forward-thinking. Because at the end of the day, it’s all about collection. You don’t increase the percentage just because you’re targeting the collection. You can do it in multiple ways; you can invite more people to participate by being friendly to crypto and at the same time, get the taxes,” said Navalam.
While he agreed with the Department of Finance (DOF) that the new measures are critical as the new administration is set to take over a country whose sovereign debt hit a record of P12.68 trillion, the focus should really be on tax administration.
“We need a lot of money to, number one, continue our growth momentum and secondly, to service more of our higher-level public debt,” he added.
Thus, Navalam added that imposing taxes in this asset class should be a welcome development for Filipinos because this is something that will move forward the country’s participation in the digital world.
“This is something that bigger companies such as Binance, Coinbase, and others are actually open to and they’re welcoming it because they know that this is going to pave the way for even more adoption in the mainstream,” he said.
Tetrix also believes that the Bangko Sentral ng Pilipinas should pursue steps to protect crypto investors to create confidence and adoption.
The BSP has been actively studying and working on digital assets which include Central Bank Digital Currency (CBDCs). Currently, there are licenses for companies with digital asset operations.
Navalam said this BSP effort only showed that the government has seen the potential of the technology as a whole, although as far as protecting crypto investors is concerned there is still a lot to be established and this is attributed to the fast adoption associated with Web3.
Web3 is being touted as the future of the internet. It is a new iteration of the world wide web that hosts decentralized apps that run on blockchain technology. Web3 advocates emphasize user privacy and ownership of data.
Navalam said that in terms of transactions and ownership, the Philippines ranks among the top countries in the world making it very attractive and strategic for web3 operators to invest in the country. “This is the reason why more and more established web3 companies are penetrating the Philippine market,” he said.
Navalam, however, could not put an estimate of investments in blockchain by Filipinos because these are mostly private investments via personal e-wallets and done on a peer-to-peer basis.
But he quoted BSP data that showed four percent of the total population or 4.3 million Filipinos own digital assets and that Filipinos rank as one of the top countries in ownership. “This number would only increase year-on-year as more people are educated and made aware of the technology it provides, and the possibility of anyone to be a part of,” he said.
According to Navalam, there are also challenges that prevent the development of the blockchain industry in the Philippines. These include general awareness and education, lack of developers, regulatory clarity, high licensing fees, and nascent solutions.
“But this is all due to the fact that the technology is still new to many,” he said.
As a project that began in 2020, Tetric Network aims at changing the way blockchains are designed and developed for the digital space. Using the omnichain interoperability protocol, businesses and developers, Tetrix can implement inter-chain applications without having to rely on a middleware approach. The explosion of the crypto ecosystem over the last several years has resulted in a greater demand to build high-throughput applications, like gaming, NFT marketplaces and media apps, on cost-effective blockchains.
The applications built on top of TETRIX make crypto more accessible to end users, accelerating the exponential adoption of digital assets, banking on its goal to be the gateway to Web3 or the decentralized internet, said Navalam.