By Krista Angela M. Montealegre
THE CRYPTOCURRENCY ECOSYSTEM is gearing up for tighter regulatory scrutiny, as market players tout the potential of the Philippines to become the main market for virtual currency (VC) in Southeast Asia.
The Philippines has a “very forward-thinking” regulatory body in the Bangko Sentral ng Pilipinas (BSP) that has embraced cryptocurrency following the rise of transactions here, Zach Piester, co-founder of venture development and innovation firm Intrepid Ventures, said at the first Blockchain & Bitcoin Conference Philippines yesterday at the EDSA Shangri-La hotel in Mandaluyong City.
“There is a need to regulate out the bad actors. Some of the things that are happening now maybe illegal in other markets, but they are not yet,” Mr. Piester said.
After a dizzying ascent from $450 per unit in May 2016 to almost $20,000 last month, Bitcoin has plunged below the $10,000 mark amid concerns of increased regulation in South Korea and China. Its price has stabilized above $10,000 per unit.
Cryptocurrencies like Bitcoin are digital currencies that are not regulated by any state or central bank. They rely on cryptography to secure and verify transactions as well as control the creation of more units.
The BSP is in the process of approving 12 entities seeking to operate as a Bitcoin exchange after authorizing two VC exchanges — Betur, Inc. (better known as Coins.ph) and Rebittance, Inc. — last year. They are considered remittance companies and are required to comply with rules on anti-money laundering, among others.
The central bank has also urged the public to exercise caution when investing in cryptocurrencies, citing its potential to be used in illicit activities such as money laundering and terrorist financing.
VC transactions in the Philippines reached a monthly average of over $8.8 million per month in the first half of last year from $2 million in the entire 2015 and $6 million in 2016, Reuters reported last month, citing BSP data.
Likewise, the Securities and Exchange Commission came out with an advisory at the start of the year warning the public against investing in unregistered securities, particularly initial coin offerings (ICO).
“Regulation here is pretty light enough that we haven’t felt so stifled over the last year… At the very least, it allows you to seek legitimacy when you are ready to do so and that’s certainly an advantage,” said Luis Buenaventura, chief technology officer at BloomSolutions and author of the book Reinventing Remittances with Bitcoin.
Investors must be aware of the technology, execution and market risks before participating in ICOs, said Nithinan Jessie Boonyawattanapisut, chief executive officer (CEO) and founder at marketing automation solutions company Hotnow (Thailand) Co. Ltd., noting that only five percent of ICOs have underlying businesses to support them.
“Regulation is coming and it is okay. We should be thankful for it will normalize the industry,” Jimmy Nguyen, CEO at blockchain research and development firm nChain Group, said in the same event.
Japan is leading the way in cryptocurrency use following its recognition of Bitcoin as a legal payment method in April last year. This has resulted in a surge in mainstream adoption, with some of that country’s biggest firms accepting Bitcoin payments last year.
Aside from certifying Bitcoin as a legal form of tender, regulators must define exemptions from cryptocurrency license or requirements. For example, nChain’s Mr. Nguyen said regulators must make it clear if software developers and providers should be licensed as well or if businesses should secure a separate money services business license if they have already obtained a “BitLicense.”
One area where cryptocurrency or the blockchain technology can be used in the Philippines is the remittance industry, said Vlad Sapozhinikov, co-founder and CEO of Deex.exchange, adding that it can help bring down costs and facilitate faster transactions.
The Philippines has the potential to be the “epicenter” of Southeast Asia’s cryptocurrency market given the huge presence of talent, development and level of “ideation” happening here, Intrepid Venture’s Mr. Piester said.
“What is happening over the last three years, it is really robust. It is coming to its own,” Intrepid Ventures’ Mr. Piester said.
“We are seeing really good projects that are born here that can fundamentally shift the balance of power and economics and empower tens of millions of Filipinos.”