By Karl Angelo N. Vidal
THE CENTRAL BANK is not endorsing cryptocurrencies as mediums of exchange or investment vehicles despite their growing popularity amid continued concerns over the technology.
“To be clear, we do not endorse privately issued cryptocurrency as a medium of exchange. Moreover, given their highly speculative and volatile nature, we do not endorse them as investment vehicles either,” Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. said in his keynote speech at the Cryptocurrency: The Truth & The Myth forum in Makati City yesterday.
Mr. Espenilla also reiterated the central bank’s stance that cryptocurrencies are not legal tender.
“It is important to note that privately-issued cryptocurrency is not legal tender. Unlike fiat money, such cryptocurrencies are not backed or guaranteed by any central monetary authority,” Mr. Espenilla said, adding that the BSP has the sole power to issue money within the country.
Cryptocurrencies such as Bitcoin, Etherium and Ripple are virtual currencies that are not regulated by any state or central bank. They rely on cryptography to secure and verify transactions and control the creation of more units.
Cryptocurrencies can also be used to pay for goods through Internet, and can be treated as an investment given their fluctuating valuations.
“Until such time that such cryptocurrencies are able to fully demonstrate stability, the prospect that they will replace fiat currencies appears to be far off,” Mr. Espenilla said. “They’re simply too volatile.”
After Bitcoin’s ascent to almost $20,000 per unit in December, it plunged below the $10,000 mark a month later following concerns of increased regulation in South Korea and China. Currently, Bitcoin sits at the $9,000-per-unit level.
On the other hand, cryptocurrencies’ attractiveness to be used in illegal activities such as money laundering and terrorist financing is another “serious concern,” the central bank chief said.
“This attractiveness stems from the anonymous and encrypted identities of transactors in private cryptocurrencies. It enables them to transact in the so-called ‘dark web’,” Mr. Espenilla explained.
With this, he then warned potential investors to fully understand the concept and risks of investing in cryptocurrencies.
“We earnestly caution the public that before speculating and investing their hard-earned money in cryptocurrency, as with any other type of currencies, prospective investment should know and fully understand the risks involved,” Mr. Espenilla said.
However, the BSP maintained its stance to regulate the use of cryptocurrencies rather than prohibiting it.
In line with this, Mr. Espenilla said it is eyeing to embark on a nationwide public information campaign on cryptocurrencies, together with other government agencies such as the Securities and Exchange Commission.
“The purpose is to educate the public on what cryptocurrencies are, the uses and risks, related policies and regulations in the Philippines, and possible benefits,” he said, adding that fostering such technology is in line with the BSP’s advocacy of financial inclusion.
In February 2017, the BSP required cryptocurrency exchanges to be registered as remittance companies which are subject to anti-money laundering rules, among others.
Since then, the monetary authority has authorized two virtual currency exchanges namely Betur, Inc. (also known as Coins.ph) and Rebittance, Inc., last year. Twelve other entities are also seeking to operate as a Bitcoin exchange.