Cryptocurrencies are rising in popularity, with almost 70 million people worldwide using blockchain wallets and the average daily trade volume going up to $130 billion USD. Crypto in the Philippines is also set to have a considerable impact as the Philippines Stock Exchange (PSE) contemplates adding digital assets to its trading platform.
While the COVID-19 pandemic played a part in driving crypto adoption and other financial technology (fintech) solutions, Filipinos were already interested in digital currencies as early as 2019. People turned to cryptocurrencies because they are decentralised, secure, accessible, store verifiable records of transactions, and provide a potential hedge against inflation.
The Philippines is ranked 17th globally on the Crypto Awareness Score survey by the online broker search firm BrokerChooser. It ranks 10th in the number of crypto owners, with over 4.3 million people investing in the currency, representing 3.98% of their population. Furthermore, it holds 12th place on the 2020 Global Crypto Adoption Index.
Adoption of cryptocurrency in Southeast Asia and barriers (or opportunities) in the market
Do these cryptocurrency trends in Southeast Asia indicate that the Philippines may be the next crypto capital in the region? Let’s examine some developments in the industry.
Utility and service-oriented digital currency XUMCoin launched in June at the Okada Manila Resort. Operating on its own blockchain known as XUMChain, it will primarily serve as a gas fee (transaction fee) in the ecosystem.
A total of 55 million premined XUMCoins will be available, with 10 million intended for circulation for the first year, each initially valued at $0.01 USD. As the ecosystem and demand expand, that value is likely to rise.
Online blockchain-based game Axie Infinity is a digital pet universe where gamers can battle custom-designed creatures known as Axies or trade them using cryptocurrency. Users must set up a digital wallet to sell their game assets in a decentralised player-owned economy. While the game creator SkyMavis offers a wallet called Ronin, the Axie Community also recommends MetaMask, another thriving crypto gateway in the Philippines.
Axie Infinity uses the Play-to-earn game model, which empowers players to own their digital identities and assets. Shifting power from the profitable gaming industry gives gamers opportunities to earn money while playing. It uses non-fungible tokens (NFTs) – blockchain digital assets signifying ownership of work – for the trades.
The gaming NFTs represent characters created by players, property, land, custom items, or other features. Once these NFTs become valuable in the game’s digital marketplace, users can sell and earn real money.
Crypto wallet and blockchain-app gateway MetaMask enables customers to trade or save digital tokens. As mentioned, it is one of the wallets used by Axie Infinity gamers. Axie uses Ethereum-based Axie Infinity Shards (AXS) and Smooth Love Potion (SLP), a gameplay reward.
The AXS sales volume of NFT gaming has gone as high as $522.66 million USD this year, with token prices peaking at $135.96 USD. However, new tax measures are affecting the numbers.
In July, the Philippines’ Central Bank, the Bangko Sentral ng Pilipinas (BSP), approved four more cryptocurrency exchanges, bringing the total to 16 service providers. Referred to as “Remittance and transfer companies (RTC) with virtual currency (VC) exchange services”, they include Philippine Digital Asset Exchange (PDAX), COEXSTAR, VHCEX, Telcoin, Atomtrans Tech Corp, Etranss Remittance International, Betur Inc., and Rebit.
Others are Moneybees Forex Corp, iRemit, Appsolutely Inc., Bexpress Pro, Finchain Technology Inc., BloomX, Coinville Phils, Zybi Tech Inc., and Wibs PHP Inc.
PDAX and UnionBank
The Bureau of the Treasury (BTr) teamed up with the Philippine Digital Asset Exchange (PDAX) and the Union Bank of the Philippines (UnionBank) to launch an app for transacting government treasury bonds. The raised funds allow the government to respond to the COVID-19 crisis in the country and boost economic recovery plans.
In 2019, UnionBank launched its first two-way virtual currency automated teller machine (ATM), allowing customers to withdraw cash from their crypto wallets.
Formal regulatory approach
The Bangko Sentral ng Pilipinas established a formal regulatory framework, Circular no. 944, in February 2017 for virtual currency exchanges. The guidelines require exchange service providers to register with the central bank to conduct remittances and transfers.
Moreover, the companies must enact adequate safeguards to protect customers and prevent money laundering.
Artists worldwide are using NFTs to sell their original creations through cryptocurrencies. In the Philippines, artist Luis Buenaventura sold 222 editions of his work for thousands of dollars, and other creators are following suit.
The cryptocurrency trends in Southeast Asia show that virtual currencies can offer secure services, safe record storage, access to fintech solutions, methods to earn money, prevent financial crime, and access to global products and services.
Challenges still remain due to its volatility, the potential use of cryptocurrencies in illegal activities, inadequate regulations, risky trading on exchanges, and scammers taking advantage. Nevertheless, crypto in the Philippines looks set to become a significant part of society and the economy in the future.