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The Philippines are known for its inefficient banking systems — the financial services offered by the nation’s leading institutions are notoriously difficult to obtain, particularly for average employees with mediocre salaries. Consequently, Filipino workers turned to local remittance networks to transfer money abroad to family members with limited access to banks. Even so, remittance outlets have high transaction fees, leading Filipino workers to look for alternatives. Enter crypto to the Philippines.
Cryptocurrency strongholds in the Philippines target the remittance problem by offering simple methods of buying and selling bitcoin with lower fees than traditional remittance services. As a result, cryptocurrency is largely prevalent in the Philippines—as of 2021, approximately 4% of the Philippines’ total population owned cryptocurrency (over 4.3 million people), and the country had the third highest uptake of cryptocurrency globally that year.
The Bangko Sentral ng Pilipinas (BSP), or the Central Bank of the Philippines, has since issued guidelines concerning virtual asset service providers (VASPs) and virtual currencies (VCs), which include cryptocurrencies. Because VCs are not backed by a central bank or a particular commodity—and are not guaranteed by any country—they are not recognised as legal tender. Since they are used as a conduit to provide financial services such as remittances and payment transactions, though, entities that provide such services by using VCs must register with the BSP; additionally, they must adopt adequate measures to mitigate the risks associated with such currencies. The guidelines also list penalties that apply to VC entities operating without the appropriate authorization from the BSP.
VASPS will also be held to guidelines that are based on international standards for regulators issued by the Financial Action Task Force. To prevent VASPs from assisting in money laundering, they must seek a “certificate of authority,” which will act as a license that allows them to operate as a money-sending business. VASPs will also need to align with BSP’s existing rules for financial service providers in areas like liquidity and operational risk, IT risk, internal controls, consumer protection and anti-money laundering. Additionally, VASPs now need a minimum capital requirement of 50 million Philippine pesos if they provide custody services, 10 million pesos ($208,000) if they do not. VASPs will also be responsible for conducting their own customer due diligence, and they must treat cryptocurrency transactions as cross-border wire transfers, keeping participant data for those over 50,000 pesos. Suspicious activity or single transactions of 50,000 pesos and over will require extra due diligence and payout restrictions.
A primer released by the BSP states that, from a consumer standpoint, there exists three main benefits of VCs (like cryptocurrency): remittances and wire transfers, electronic payments and financial inclusion.
Firstly, the Philippines receives an high amount of remittances from overseas–many Filipinos either receive remittances from abroad, or send remittances to relatives and loved ones within the country. Additionally, an increasing number of Filipinos shop online, pay for goods and services online, or transfer funds via digital means. These remittances and transfers can be faster, more convenient and cheaper when facilitated by cryptocurrency—as opposed to traditional remittance and payment schemes—which allows the average Filipino to benefit. This may also enhance competition in the remittance and payments market, resulting in lower transaction costs and improved services for consumers.
Secondly, VCs are easier to use as payments for online goods and services, which can support the growing e-commerce industry in the Philippines and the use of social media, mobile technologies and other creative platforms as delivery channels for financial transactions and services.
Finally, VCs can also improve financial inclusion for the general populace. VCs can facilitate and expand financial services for low-income Filipinos, as well as those living in more remote areas where traditional financial service providers (i.e. banks) lack reach. This is both possible and profitable, given the cost-effectiveness of VC transactions, as well as Filipinos’ tendency to quickly adapt to digital platforms and mobile technology.
Earlier this month, PayMaya (the Philippines’ top payment provider) launched a new cryptocurrency feature on its app. With over 40 million users, the fintech company is a VASP, a virtual money issuer (EMI), and the country’s largest provider of digital payments. With this initiative, PayMaya users can trade, purchase and spend digital assets with their accounts. Part of PayMaya’s aim to offer a comprehensive crypto package for anybody interested in entering the market, the feature will also simplify crypto education for Filipinos. It will likewise eliminate the necessity for users to register with cryptocurrency exchanges, create a crypto wallet and go through other KYC hoops. PayMaya users with upgraded accounts can directly trade their Bitcoin and Ether for Philippine pesos; other cryptocurrencies available for trading on the site include Cardano, Chainlink, UNISWAP, Solana, Quant, Polkadot and Polygon, with more coins to be added soon.
In late January, the Union Bank of the Philippines announced plans to offer trading and custodial services for cryptocurrencies to capitalize on the fast adoption of digital tokens within the country. The bank’s custodial services for digital assets will also cover tokenized bonds. UnionBank will use a system developed by Switzerland’s Metaco for managing its digital-asset operations, which comes as a natural progression: in 2019, UnionBank became the first Philippine lender to launch its own stablecoin—called PHX—which provided rural banks in its network easier access to remittance payments.
Axie Infinity also made headlines in 2021 due to the sheer amount of Flipinos playing it (and profiting). Many Filipinos played Axie Infinity as a way of earning money; one player even claimed that he managed to buy two houses in the Philippines using the in-game profits that he had earned from selling small-love potions for cryptocurrency.
There are a few prominent local crypto companies in the Philippines that have reach within the country, though none can compare to Coins.ph.
Coins.ph is a popular crypto company and bitcoin platform in the Philippines whose mission is to increase financial inclusion across Southeast Asia’s 650 million population, an area which remains largely unbanked. The fintech company enables anyone—including those without a bank account—to access financial services directly from their phone. Coins.ph serves over 10 million customers, and it was one of the first blockchain-backed platforms to reach significant mainstream consumer adoption. The company has also built one of the Philippine’s largest cash distribution networks, operating through over 33,000 partner locations domestically and over 500,000 locations worldwide. Coins.ph is regulated by the BSP and is the first ever blockchain-based company in Asia to hold both VC and Electronic Money Issuer licenses from a central bank.
The company’s mobile app provides consumers with direct access to banking and digital payment services, including local and international remittances, mobile air-time, bill payments, game credits and online shopping. Additionally, its services also enable users to settle utility bills—such as credit card, electricity, water, and rental fees— using bitcoin instead of cash. With Coins.ph’s close ties to local payment network providers and banks, such as UnionBank and Ripple, it also allows users to purchase and sell bitcoin through traditional methods such as bank deposits, bank wiring, and ATM deposits.
ABOUT THE WRITER
Han Shen Tjoa is a contributor to Identity Review from the University of Southern California.
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