The digital transformation of the Philippines can make it a new cryptocurrency hub

Binance, the cryptocurrency exchange, has recently acquired a virtual asset service provider (VASP) license from the Bank of Spain to operate in the country. In its ambitious expansion plans that the cryptocurrency exchange continues despite the global jump and the market decline in the crypto market, there is another country that Binance is looking at – the Philippines.

In June, Binance’s CEO, Changpeng Zhao, stated at a press conference in Manila that the stock exchange is looking for a VASP license in the Philippines. In addition to VASP, Binance wants to obtain an e-money issuer license from the country’s central bank, Bangko Sentral ng Pilipinas (BSP). While the former license would allow the platform to provide cryptocurrency trading services and the conversion of these assets to the Philippines, the latter would allow it to issue electronic money.

The Philippines is the world’s 36th largest economy in the world by nominal GDP and the third largest in Asia, according to data from the World Bank. Despite its small size, the country is considered to be one of the fastest growing economies in the world due to its recent industrialization, thus marking a distinctive shift from agriculture to services and production.

Cryptocurrencies are extremely popular in the Philippines due to the economic shift the country underwent when digital assets began to gain popularity. A recent survey has revealed that the Philippines ranks 10th in terms of cryptocurrency usage, with over 11.6 million Filipinos owning digital assets.

This is also evidenced by the fact that according to data from ActivePlayer.io, 40% of all players in the popular play-to-earn (P2E) game were Axie Infinity from the Philippines. In fact, the game has also been an economic game-changer for many residents of the country.

Related: How blockchain games create entire economies on top of gaming: Report

Cointelegraph spoke with Omar Moscosco, co-founder of AAG Ventures – a Philippines-based P2E guild – about the Philippines’ potential for mass adoption of digital assets. He said, “The Philippines is home to a large population without a bank and subbank, with about 66 percent of this total population not having access to traditional banking services or similar financial organizations.”

He added that COVID-19 triggered a digital transformation in the country, and said:

“The Philippines recorded the highest number of first-time users of digital payment methods at 37 percent. The regional average was 15 percent. As such, digital payments accounted for 20 percent of total financial transactions in the country in 2020, an increase from 14 percent in 2019. In 2020, e-money transactions also accounted for PHP 2.39 trillion ($ 46.5 million), an increase of 61 percent compared to with 2019. “

Jin Gonzalez, chief architect of Oz Finance – a Philippines-based decentralized financial services provider (DeFi) – told the Cointelegraph about the impact the entry of Binance into the country would have on the market. He said, “Binance already receives a large amount of Philippine peso volume for its peer-to-peer service (PHP / USDT). It is also the exchange of choice for Filipinos because of the favorable prices it charges to local service providers. Obtaining a BSP license will only legitimize the operation and strengthen its position in the market. “

However, global concerns have begun to emerge around the framework against money laundering (AML) and the fight against terrorist financing (CFT) used by companies with VASP licenses. The Bank of Ireland has published a bulletin for VASPs that aims to help applicant companies strengthen their VASP registration application and their AML / CFT framework accordingly.

This development was good for the growing ecosystem, as it addresses concerns that would inevitably arise when considering the integration of digital assets into the existing financial ecosystem and economy. At the same time, Hong Kong introduced a licensing regime for VASPs in June this year, which imposes statutory AML / CTF requirements for companies wishing to operate in the country.

The Central Board is concerned with pushing utility issues

The regulatory landscape in the Philippines is still in its infancy as there is currently no strict restrictive regulation for both companies and individuals. In fact, the government in the country, together with the central bank, seems concerned with adopting blockchain technology and implementing the use cases in various sectors of the economy. Gonzalez sa:

“At the moment, BSP regulation is in place, but SEC regulation has not yet been adopted. In any case, the Philippines has an open position on digital assets, and its intention to regulate is intended to balance investor protection with promoting technology development. PH regulators “, especially the central bank, maintains a progressive stance on the introduction of digital assets.”

Earlier this year, in May, the Philippine Government’s Department of Science and Technology launched a blockchain training program for researchers at the department. Through the training program, the government wants to use blockchain in areas such as health services, financial support, emergency aid, issuance of passports and visas, trademark registration and government registers, among others.

The Philippine-based UnionBank has also launched a payment-focused stablecoin linked to the Philippine peso, which aims to drive financial inclusion in the country. It tries to link the main banks in the country to rural banks and provide financial access to previously unbanked parts of the country. Gonzalez sa:

For the time being, it seems satisfied to observe how bank-issued stack coins (such as PHX by UnionBank) will bring about financial inclusion.

Even with the transparency of the authorities, however, there are entities that keep an eye on irregularities in the way companies with digital assets operate. The local political think tank Infrawatch PH has sent a letter to the Philippine Ministry of Trade and Industry (DTI) asking them to conduct an investigation against Binance for promotions in the country without having a proper permit for the same.

DTI responded to this letter and put the ban out of the question by saying that it has not set any clear guidelines for marketing digital assets.

The CBDC launch could be a game changer for the country

Since the majority of the people of the Philippines are without a bank and thus operate in a rather unregulated manner in matters such as taxation, the introduction of a central bank digital currency (CBDC) in the economy can be a major step in the digital transformation that the country has. currently underway.

Moscoso said, “CBDCs can take advantage of mobile technologies to provide increased access to financial services to rural households and other segments that are underserved by the current banking system. The central bank expects at least half of the payments to be made digitally by 2023.”

Related: Crypto in the Philippines: Necessity is the mother of adoption

He added that around 70% of adults will use a digital account for transactions at this time, allowing consumers more options that can get them to steer clear of loan sharks.

Despite the current bear market, the Philippines still has a forward-looking perspective on the use of digital assets and blockchain-based business models. These prospects put the country in a good position, with the potential to become a cryptocurrency hub.