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The Philippines central bank claims that cryptocurrency needs a "enabling environment."

The Philippines cent

Despite acknowledging that cryptocurrencies have the potential to enhance domestic and international payments, the Philippine central bank continues to oppose the use of cryptocurrencies as legal money.

The Philippines' central bank is looking for ways to better protect investors amid the country's growing cryptocurrency usage by raising local crypto understanding.

According to a BSP spokesman, the Bangko Sentral ng Pilipinas (BSP), the country's central bank, wants to encourage crypto education since it sees several advantages to cryptocurrencies and blockchain technology.

"The BSP's focus is on virtual assets' capacity to improve the delivery of financial services, notably payments and remittances services, as it has potential to enable faster and more cost-effective money transfers in both domestic and international settings," the BSP said.

The COVID-19 epidemic, according to the BSP, has caused a rise in crypto usage in the Philippines over the past few years. As a result, in July 2021, trade volumes for Bitcoin (BTC) on various peer-to-peer cryptocurrency exchanges in the Philippines were reaching new highs. The BSP spokeswoman stated, "During the pandemic, we have noticed consumers' eagerness to explore the virtual world, especially online platforms that promise to give income-generating opportunities or play-to-earn apps."

The Philippine central bank has no immediate plans to impose any significant restrictions on cryptocurrency trade or investment in response to the adoption's growth. Instead, the spokesman for the central bank stated that the BSP is planning to pursue a regulatory strategy designed to create a "enabling environment" through "risk-based and appropriate rules." 

The BSP has a very negative opinion on using cryptocurrency as a payment method, despite aiming to create a "enabling environment" for it. The bank stated that "virtual assets, notably cryptocurrencies, are not organically meant to serve as legal money." Instead, their values are derived from the consensus of the user community.

The BSP claims that because of risks like significant volatility, a high potential for illegal use or theft due to enhanced anonymity, and "poor cyber and digital identity security protocols," cryptocurrencies cannot be used as a form of payment. The bank listed the irreversibility of crypto transactions as one of the hazards, which means that no central body would ever be able to reverse a Bitcoin transaction or recover lost cash.

The BSP further emphasised that rather than treating cryptocurrencies as money, the agency views them as virtual assets. Virtual assets expose users to price volatility and loss risk because speculation drives the price of the majority of virtual assets, according to the BSP. The central bank released recommendations for virtual asset service providers as part of Circular to address this. The BSP continues to believe that using blockchain technology will significantly improve the efficiency and security of financial services in the Philippines. The issuing of a central bank digital currency is now being investigated by the central bank (CBDC).

With the help of a wholesale CBDC platform, the BSP intends to launch Initiative CBDCPh, a trial project that will allow inter-institutional fund transfers. The bank claims that a retail CBDC is not very important for the nation in the near future.

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