Binance, a cryptocurrency exchange, recently obtained a license from Bank of Spain for virtual asset service provider (VASP). This allows it to operate in the Philippines. Binance’s ambitious expansion plans, despite market slumps and global jumps in crypto currency trading, are continuing. Binance is now looking to the Philippines.
Changpeng Zhao (CEO of Binance) stated that the exchange was looking to get a VASP license for the Philippines in a press conference in Manila in June. Binance also wants an e-money license from Bangko Sentral ng Pilipinas, the central bank of the Philippines. The former license would have allowed the platform to trade crypto assets and convert these assets to the Philippines. However, the latter license will permit it to issue electronic currency.
According to the World Bank data, the Philippines is the 36th-largest economy in the world in nominal GDP. It also ranks third in Asia. Despite being small, the Philippines is one of the fastest growing economies in the world. This is due to its recent industrialization, which marks a shift from agricultural to manufacturing.
Philippines Gross Domestic Product in U.S. Dollars 1997-2001 Source: Trading Economics
Due to the dramatic economic shift in the Philippines, cryptocurrencies have become very popular. Recent surveys have revealed that the Philippines is ranked 10th in cryptocurrency adoption with more than 11.6 million Filipinos having digital assets.
ActivePlayer.io data shows that 40% of all players of the play-to earn (P2E), game Axie infinity came from the Philippines. The game has been a financial game changer for many citizens of the country.
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Cointelegraph spoke to Omar Moscosco about the potential for digital asset adoption in the Philippines. He is the co-founder and chief executive officer of AAG Ventures, a P2E group based in the Philippines. He stated that the Philippines has a large underbanked and unbanked population. Some 66 percent of these people do not have access to traditional financial services.
He said that COVID-19 was responsible for a digital transformation of the country.
At 37 percent, the Philippines had the highest percentage of digital payment users. Regionally, the average was 15%. Digital payments accounted for 20 percent of all financial transactions in the country by 2020, a rise from 14 percent in 2019. In 2020, emoney transactions amounted to 2.39 trillion PHP (46.5 million USD), which is a 61% increase compared with 2019.
Jin Gonzalez, the chief architect of Oz Finance (a Decentralized Finance (DeFi) provider based in the Philippines), spoke to Cointelegraph about what the market would experience if Binance entered the country. He stated that Binance receives a lot of Philippine peso volume from its peer-to–peer (PHP/USDT). Because of its favorable rates, it is the preferred exchange for Filipinos over local service providers. A BSP license will legitimize the exchange and help it strengthen its market position.
Global concerns have emerged about the Anti-Money Laundering and Combating the Financing of Terrorism frameworks used by VASP license holders. The bulletin for VASPs has been published by the central bank of Ireland. It is designed to assist applicants firms in strengthening their VASP registration applications and their AML/CFT frameworks.
This was a positive development for the ecosystem as it addressed concerns that could inevitably arise when integrating digital assets into the existing financial system. In June, Hong Kong also introduced VASP licensing, which requires compliance with AML/CTF standards for all companies wishing to do business in the country.
The central government is keen to encourage use cases
As there are no restrictions on individuals and businesses, the regulatory landscape in the Philippines is still very much in its infancy. The government of the Philippines, along with its central bank seems to be keen to adopt blockchain technology in order for it to be used in different sectors of the economy. Gonzalez said:
“Currently, BSP regulation exists, but SEC regulation is yet to be passed. The Philippines maintains an open position regarding digital assets. Its intention to regulate is to protect investors while promoting the development of technology. The Central Bank and PH regulators continue to take a progressive stance on digital asset adoption.
In May this year, the Department of Science and Technology of the Philippines launched a training program in blockchain for its researchers. The government hopes to use blockchain in healthcare, financial support and emergency aid. It also plans to implement blockchain in trademark registration, government records and issuance of passports.
Cliffs at El Nido, Philippines. Source: Tuderna
UnionBank, a Philippines-based bank, has launched a stablecoin that is payments-focused and pegged to the Philippine peso. This currency aims to increase financial inclusion in the Philippines. It aims to connect the main banks to the rural banks, and provide financial access to areas previously unbanked. Gonzalez said:
It seems to be content for the moment to watch how bank-issued stabilitycoins, such as PHX by UnionBank, will promote financial inclusion.
Even with all the transparency of the government, entities are still keeping an eye on irregularities in digital asset company operations. Infrawatch PH, a local policy thinktank, has written to the Department of Trade and Industry (DTI), asking them to investigate Binance’s promotion in the Philippines without a permit.
DTI replied to the letter and stated that the ban was out of question.
The launch of CBDC could be a game changer for the country
The majority of Filipinos are not banked, and so operate in an unregulated manner in taxation matters. Therefore, the introduction of a digital currency from the central bank (CBDC), into the economy could be a significant step in the digital transformation the country is currently experiencing.
Moscoso stated that “CBDCs could take advantage of mobile technology to provide greater access to financial services for rural households and other segments that are not served by the current banking system.” According to the central bank, at least half of all payments will eventually be made electronically by 2023.
Related: Crypto in Philippines: Adoption is a necessity
He said that 70% of adults will use a digital account to make transactions by the time this is written. This gives consumers additional options that can help them avoid loan sharks.
Despite the current bear markets, the Philippines has a forward-thinking outlook about digital assets adoption and blockchain-based business models. This outlook places the country in a favorable position, and it has the potential to be a crypto hub.