MACTAN, Cebu—Bangko Sentral ng Pilipinas Governor Felipe M. Medalla said the use of cryptocurrency, mainly by younger people, is akin to gambling due to the huge losses they incur when trading their digital assets.
He said that while it may be argued that this is their personal problem because this is their own money, regulation becomes stricter when crypto currency meets the banking.
“The point where the crypto gets changed into pesos or bank accounts—that’s the time where all regulations come in. As you know, whether it’s crypto or regular banking, the entire world is afraid that cross-border movements of money could be financing things that are quite destructive,” Medalla said in a news conference after the meeting of the Financial Stability Board (FSB) regional consultative group for Asia.
“Indeed, our big problem is the Philippines is in the gray list, which has possible consequences. We have had a moratorium of issuances of what we call VASP, Virtual Assets Service Provider—these are the things we want to address,” Medalla said.
The BSP recognizes that virtual asset systems have the potential to revolutionize the delivery of financial services by providing faster and more economical means of moving funds, both domestic and international, and may further support financial inclusion.
In its circular passed in 2021, BSP said it believes these benefits, however, should be considered along with the risks in virtual assets, considering the higher degree of anonymity involved, the velocity of transactions, volatility of prices and global accessibility.
Medalla said he personally does not think protecting the investor is the main concern of regulation of the virtual assets by the central bank.
“If you’re willing to gamble your own money, it’s your loss. Although I have heard of anecdotes of young people almost committing suicide because they lost a lot. From my point of view, that’s the state of play that those things are not,” he said.
“Crypto for the Philippines is not a financial stability issue because it doesn’t involve too many people in that aspect, but it is an issue that may call the attention of the government one way or another,” he said.
Klaas Knot, chairman of the FSB, said the board is working to deliver a set of high-level recommendations on the regulation of stable coins and other crypto assets during its July G-20 meeting. “They are moving as fast as they can as well because the industry is very rapidly moving, so the quicker we can get it done, the better it is,” Knot said.
“But we try to make that lag [of one year] as short as possible given the rapid developments and as early as 2024, and in some jurisdictions, for instance, there is already a regulation in European markets in crypto assets,” he added.
The group also took into consideration countries that are not willing to implement the standards, which may cause all the crypto asset activity to migrate to more favorable jurisdictions. “We have to think about regulatory treatment which would be additionally punishing to those jurisdictions that try to play this holdout game where [there is] exposure, for instance, of the traditional financial institutions to crypto asset activities,” he said. Medalla said the good-use example of crypto assets is its utilization by many overseas Filipino workers as a cheaper means of sending money to their home towns.
“Now, if any, the minimum duty of the regulator is to find out if they can really deliver a stable exchange rate and clearly we have to look at the financial position, that the firm promises stability,” he said.
The process, however, will have to be done in an efficient way, he added.
Discussions of the FSB meeting in Cebu have centered around recent financial market developments and their impact on the region, the role of non-bank financial intermediation in Asia and the development of an effective global regulatory framework for crypto-assets.
The G20 has charged the FSB with the development of an effective and comprehensive regulatory framework for crypto-assets. Members shared experiences and developments in regulating crypto-assets, intermediaries and markets in their jurisdictions and recognized the need to mitigate the risks that may arise from them.