During recent months, an official from the central bank of the Philippines mentioned that digital currency conversions in the country hit almost $40 million despite the slump in cryptocurrency prices. The BSP and Union Bank are now showing interest and are more open to discussing the possibilities of the blockchain and cryptocurrency industry which is a promising outlook to the blockchain Industry in the Philippines.
While the total market capitalization of cryptocurrencies averaged at around $450 billion a month, conversions from Philippine peso to digital coins averaged $36.74 million per month during this year’s first quarter as mentioned by Deputy Governor Chuchi G. Fonacier of the Bangko Sentral ng Pilipinas (BSP). This figure comes from the cryptocurrency exchanges Betur, Inc., and Rebittance, Inc, which are both recognized by the BSP.
The BSP regulation
On February 2017, the BSP released a formal regulatory framework for virtual currency exchanges for businesses that trade and convert fiat to crypto through Circular 944. Though the BSP does endorse virtual currency as a currency, it recognized that crypto transactions are faster, cheaper, and may support financial inclusion compared to mainstream remittance channels.
The central banking authority also recognized the extreme volatility of price actions and the risk of cybercrime, fraud, and money laundering. Thus, as part of regulation, the BSP required trading platforms and digital wallets to release information regarding risk management in order to avoid money laundering. Adding to BSP’s crypto regulations, the Philippine’s Anti-Money Laundering Council has said that it will also look into crypto transactions as part of its campaign to crack down on illegal money. Exchanges will be required to report any shady transactions in the process.
The BSP is also looking into requiring digital exchanges to acquire licenses as electronic money issuers (EMI) in addition to the digital currency licenses. This will mostly push through if clients and customers are able to store cryptocurrencies with the institutions.
The benefits of bitcoin
Just recently, Melchor Plabasa, the BSP Deputy Director, talked positively about the potentials of cryptocurrencies. He said, “[Bitcoin is] like any other monetized instrument [and even] an investment instrument. There are risks, but essentially it can be managed. If you want something that is fast, near real-time and convenient, then there’s the benefit of using virtual currencies like Bitcoin.”
Blockchain in mainstream banking solutions
It looks like the blockchain technology is slowly making its way into mainstream adoption. A news article from the Philippine News Agency reports that four rural banks have partnered with Union Bank to develop a blockchain technology-based payment system.
Union Bank officials vow that they aim to help smaller banks in terms of improvement in efficiency. In a briefing, Senior Executive Vice President and Chief Technology and Operations Officer for Union Bank, Henry Rhoel Aguda, said that they are helping rural banks, “elevate their capabilities.” Aguda adds, “We’re co-creating the blockchain platform to be used by the rural banks.”
Union Bank and Visa B2B Connect platform
Union Bank is the first bank in the Philippines to be chosen by Visa for Visa’s B2B Connect platform, which is a business solution that enables financial institutions to provide service to clients with fast and secure cross-border payments. This platform uses the blockchain technology to transfer money almost instantly, instead of the usual delay of three to five business days. Using the blockchain also lessens the costs versus existing methods.
Some of the banks also tapped by Visa for initial implementation are Commerce Bank in the United States, Sberbank in Russia, Shinhan Bank in South Korea, and the United Overseas Bank of Singapore. Later this year, Visa is set to launch the platform.
From rural banks to SMEs
According to Aguda, they will be focusing on their partnership with the four rural banks but assures that they are not closing doors for more partnerships for this business solution platform.
“We want to grow from four right now to as many as we can support,” Aguda added.
Aside from rural banks, Union Bank President and CEO Edwin Bautista said that they were also targeting to partner with small and medium enterprise (SME) partners of their current clients as prospect tie-ups for this system.
The rise of the blockchain technology
The blockchain technology was conceptualized in 2008 by a person or a group of person only known as Satoshi Nakamoto. It was not until recently that the blockchain was given much attention. The blockchain technology came into the mainstream spotlight through the rise of cryptocurrencies in 2017, namely the boom in bitcoin prices during the last quarter of 2017.
Although there have already been many developments coming from the blockchain, we have only merely scratched the surface in terms of its potentials. With major financial institutions now exploring the potentials of the blockchain, we can expect more innovations in the near future.
With the BSP and Union Bank seeing potentials in cryptocurrencies and blockchain technology for real-world applications, the crypto space in the Philippines is very promising. Hopefully, more developments will come in the near future, which will put cryptocurrencies to mainstream adaptation in the country.