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BSP studying applications from players eyeing to set up virtual currency exchanges

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Bitcoin medal
A May 1, 2014 photo taken in Washington, DC shows a bitcoin medal. Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and issuing of bitcoins is carried out collectively by the network. -- AFP

THE Bangko Sentral ng Pilipinas (BSP) is evaluating 12 applications from new players looking to set up virtual currency exchanges in the country amid rapidly growing interest in bitcoin and similar platforms.

BSP Deputy Director Melchor T. Plabasan said applications from 12 financial technology (fintech) firms are being evaluated by the central bank, which would add to two players already approved by the regulator this year.

The new applications come from “locally incorporated” fintech players which are majority owned by foreigners, Mr. Plabasan said, most of which are using bitcoin as their currency. Eight are completing documentary requirements, while four have finished presenting their business models to the regulator.

“We first have to ensure that the activity or service being offered by this particular company should be regulated by the BSP,” Mr. Plabasan, who also heads the BSP’s core information technology specialist group, said during a media briefing yesterday.

“As long as the applicants can substantially complete all the requirements, we can [approve] probably within the first or second quarter of next year.”

Bitcoin is a form of easily transferable electronic currency used for paying goods sold through the Internet, which sometimes stands as an investment for its holders given its fluctuating valuation. It is a form of digital money that is not issued or guaranteed by a central bank, and can be sent or received by anonymous users internationally.

Under the law, the BSP is the sole authority that can issue money in the Philippines through bank notes and coins used as legal tender for day-to-day transactions.

Any person can buy and sell bitcoins, which may be traded by tapping the services of bitcoin dealers or brokers who look for good deals for a bitcoin investor; going to bitcoin exchanges — an establishment that allows bitcoin holders to directly buy and sell the virtual currency; participate in a “mining pool” — a group of individuals with top-of-the-line computers that can solve complex math problems to unlock codes in exchange for a bitcoin; or look for someone to trade cash or goods for bitcoins.

Currently, two virtual currency exchanges are registered with the BSP: Rebittance, Inc. and Betur, Inc. more popularly known as Coins.ph.

Transactions using virtual currency have increased fourfold, with monthly volumes averaging at $8.8 million between January-June of this year, Mr. Plabasan said.

ADVISORY
In the same vein, the central bank is also preparing a new advisory to warn the public against fraudsters who pass off pyramid scams as bitcoin investments with the promise staggering returns, leveraging on the strong appeal of virtual currencies.

“We also recognize that there are a lot of pyramid schemes right now disguised as ICOs (initial coin offerings) or investment channels. We will also advise the general public to be wary of these types of institutions,” Mr. Plabasan added.

“If they are enticing, some of them… are really too good to be true, [but] no one can ever guarantee that the price of bitcoin will always be rising.”

Albeit unregulated, bitcoin values have been soaring in recent days to a steady ascent towards the $20,000 mark, Reuters reported.

The central bank official added that they are asking the public to deal with exchanges registered with the BSP, noting that they are waiting for Monetary Board approval for the public notice.

The regulator issued its first public warning on the use of digital currencies in March 2014, when foreign regulators banned banks and brokers from handling the new currency following the collapse of Mr. Gox, a Tokyo-based bitcoin exchange.

The BSP will also be starting discussions with the Securities and Exchange Commission for “cooperative oversight” on coin offerings, especially for those with investment features.

Mr. Plabasan said the Philippines is an “ideal market” for virtual currencies given a young and tech-savvy population, widespread use of smartphones and social media and a big portion of unbanked citizens. Bitcoin transfers are likewise attractive due to cheaper remittance fees, with the country being the third-biggest receiver market in the world.

However, risks attached to bitcoin and similar platforms include volatile valuations, irrevocable transfers, consumer protection and security concerns, and its possible use for illegal activities, the official said. — Melissa Luz T. Lopez





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