By Philippines: The chief of the central bank of the island nation recently warned over the risks of the increase of cryptocurrency use in the country.
Published in a post released on Monday by The Philippine Star, governor of the Bangko Sentral ng Pilipinas, Benjamin Diokno, was quoted stating that his institution would continue to address the use of digital assets in light of its potential use cases in terrorism funding.
Diwa Guinigundo, the deputy governor at the Central bank also cited cryptocurrencies limitations as a suitable substitute for fiat currency as both a medium of exchange and genuine value.
Although cryptocurrency and blockchain can be utilised for settlements, they essentially allow customers to bypass the traditional banking system altogether.
Guinigundo stated:
“For this reason, game theory dictates possible dysfunction when there is market breakdown, when everyone may distrust one another. There cannot be a total disregard for a central bank or a third party that provides lender of last resort facility.”
In order to balance the encouragement of innovation with risk mitigation, the central bank opts for a regulatory sandbox to ensure oversight of emerging and new technologies stated Guinigundo.
The warning from the central bank’s executives comes at a time during which the use of cryptocurrencies in the Philippines continues to rise at exponential rates. Recently, The PhilStar reported that digital currency transactions in the nation nearly doubled from $189.18 million in 2017 to $390.37 million in 2018, as per data compiled by the central bank’s Technology Risk and Innovation Supervision Department.
The transactions included in those figures also include conversions of the Philippines peso and other fiat currencies to crypto and vice versa and inbound international remittances facilitated through the use of cryptocurrencies.
The Central Bank responded the to spike in use of cryptos when it issued a circular in February 2017 which called for crypto exchanges to register with the central bank as remittance and transfer companies. Furthermore, the central authority also required all such firms to create the necessary protections to ensure the protection of the consumer and to combat illicit activities such as terrorism financing and money laundering.
The central bank accentuated that it has no intention of supporting any cryptocurrency due to the fact that cryptos are not issued or overseen by a central bank or backed by any commodity. In spite of this, the regulatory body states that it has plans to begin proper regulation of the technology when applied as a vehicle for financial services, specifically for payments and remittance services in an effort to ensure consumer protection.
At the time of press, as many as ten cryptocurrency exchanges based in the Philippines have been registered with the country’s central bank.
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