TO PROTECT INVESTING PUBLIC ON CRYPTO: BSP expands cybersecurity controls, scope

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    Cryptocurrency is on its way to becoming mainstream in the Philippines, with innovations like rural bank integration, BTC ATMs, and gaming rewards as early indicators. Its reaching mass adoption was the consensus by experts from the Bangko Sentral ng Pilipinas (BSP) and industry leaders in a webinar held recently.

    The European Chamber of Commerce of the Philippines (ECCP) and the Fintech Philippines Association said Filipinos increasingly try out the potentials of Bitcoin and other digital monies as investments and income-generators. The Philippines has the third highest rate of crypto use across the world, following Nigeria and Vietnam.

    BSP Technology Risk and Innovation Supervision Director Melchor Plabasan said that regulation is important especially because cryptocurrency can revolutionize payments and remittances. Crypto assets can also be used for activities like fundraising.

    “Regulations are designed to protect the investing public,” Plabasan said, “We have expanded their scope, strengthened the rules on consumer protection and cybersecurity controls.”

    “BSP recognizes the future of crypto in the Philippines,” Plabasan said.

    RA 11211 or the New Central Bank Act holds that the BSP’s supervision of financial institutions now includes certain crypto asset businesses. Amendments to the virtual currency exchange policy via BSP Circular 1108 further span the definition and scope of virtual currencies, risk disclosure, capital requirements following a risk-based approach, and internal controls.

    BSP also issued a framework early this year to guard cryptocurrency from being used in money laundering.

    “We are living in interesting times in crypto,” Philippine Assets and Digital Exchange (PDAX) CEO and Founder Nichel Gaba said. “Between December 2020 to today, something happened to put bitcoin and crypto into a space where even traditional portfolio managers need to consider them.”

    While acknowledging that the infrastructure supporting cryptocurrency platforms in the country is “healthy,” Gaba, who leads one of the top digital exchanges, also said that growth of the fintech “‘needs a viable ecosystem because financial services are interconnected. We need support from institutions and regulatory bodies.”

    He elaborated that mainstreaming and mass adoption, or the creation of an ecosystem where blockchain and cryptocurrency technology are widely used, has become inevitable because of the shifting technological and financial landscapes. PDAX itself has experienced 70 times more transactions and 15 times user growth in the last 11 months alone.

    Bitcoin drew public attention in 2017 when values surged from under $ 1,000 to more than $19,000 by the end of the year. Flash forward to 2021 where a more stable and reliable regulatory framework exists from the BSP, safeguarding users while helping to facilitate the unprecedented growth of 12-year old Bitcoin which Gaba described is still in its “puberty” stage. As of December 2020, BSP has recognized 17 virtual currency exchanges who are industry-compliant, PDAX among them.

    Amor Maclang, ECCP Innovations Committee Chairperson and Fintech Philippines Association Executive Director, maintained that the public’s evolving needs, which crypto can solve, make its mass adoption inevitable, though it might take time.

    “We recognize it might take decades for blockchain to permeate. Nascent technology moves more towards mass adoption and that’s why we move to technology from the perspective of advocacy. People don’t need to actually understand the tech to understand what it can do for them,” Maclang said.

    Luis Buenaventura II, Founder & Chief Strategy Officer of BloomSolutions, named one reason for organic crypto growth: “Mainstreaming of cryptocurrency will happen naturally if there are enough niche cases, and people find them valuable.”

    Making cryptocurrency accessible and blockchain technology useful to Filipinos by integrating them to the financial supply chain areas and rural banks is the thrust of UBX Philippines, the fintech arm of UnionBank. According to UBX Board Chairman Henry Aguda, “There are more uses beyond what people nowadays experience. A lot of central banks are moving towards creating digital currencies.”