The central bank said it is considering regulating the use of virtual currencies to prevent cybercriminals from making this technological innovation a tool for money-laundering activities.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor Espenilla Jr. said virtual currencies are a form of unregulated digital money, which allows the purchase of both virtual and real goods and services; they are not backed by any commodity but are merely valued subjectively according to one’s ability to exchange them for goods.
The most common example is Bitcoin, a type of digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.
“Bitcoin is the first one that has been able to gain broader market attention,” Espenilla said.
He said that currently, Bitcoin has a P3.6-billion market capitalization, equivalent to about 19 percent of the total market capitalization of the top 10 virtual currencies.
“A lot of money in this case. Bitcoin itself is growing in the Philippines,” he added.
Citing statistics, the BSP official said the Philippines is apparently third in the world in
terms of Bitcoin applications, with a growth rate of over 100 percent as of the first half of 2015.
In the Philippines, bitcoin exchanges or estimated transactions passing through the registered companies range between $2 million to $3 million per month, he said.
“So it is not a small amount of transactions. We do recognize that this is an area that has become significant, and that normally brings BSP attention,” he said.
Espenilla stressed that the central bank recognized that virtual currencies could improve the efficiency of remittance transactions and lower the cost of the remittance business.
“That is one good reason to not close our minds to it right away. But we also accept that there are risks to it,” he said.
The BSP deputy governor said some of the risks were money laundering activities and consumer protection issues.
“As you know, bitcoin prices may vary and customers might get the wrong idea and invest with it and think that it has the same value,” he added.
Going forward, Espenilla said the BSP would be issuing regulations that amend Circular 471, which covers non-bank financial institutions.
Amendments to the circular will clearly define the regulatory environment of virtual currencies in the Philippines, he said.
“We are putting it to that space, along with traditional remittance companies and money changers,” he said.