BSP takes closer look at digital currency trading

MANILA, Philippines - The Bangko Sentral ng Pilipinas said yesterday it is looking at an “appropriate” approach in regulating online currency Bitcoin, which is currently gaining popularity in the country.

“The BSP is studying the appropriate regulatory approach to this innovation,” central bank Governor Amando M. Tetangco Jr. said in an e-mail.

“We are trying to better understand the intricacies of its use and implications on consumer protection,” he added.

Bitcoin, which started circulating in 2009, is a form of virtual currency with no backing from any central bank or government. Its value primarily depends on investor sentiment and on the product’s demand and supply.

“This innovation could possibly offer a low cost remittance solution, but we would need to have some level of confidence that the weaknesses could be addressed,” Tetangco said.

“As we understand it, there still isn’t global agreement on how to handle this new technological innovation,” he added.

Bitcoins are kept in a digital wallet and investors go to online exchanges to trade them. Trading platforms, meanwhile, are also available to the public although this does not require the investor to have a bitcoin wallet. Bitcoin transactions are designed to transfer funds between two parties without a bank or other intermediary.

The digital currency is widely known for the volatility of its value and for the high risk it entails.

“It has recently come to the attention of the BSP that virtual currencies like bitcoins are now being exchanged in the Philippines,” Tetangco said.

“This is the reason we put out an advisory just this week to warn the public that in the Philippines these and other virtual currencies are still unregulated,” he continued.

The central bank last week warned that since there are no existing regulations over the digital currency, investors will have no protection against financial losses or when exchanges and platforms go out of business.

The BSP also stressed that it will be monitoring developments on Bitcoins because they can easily be used for money laundering and other illegal purposes.

“Those who engage in virtual currency exchange could lose their money through a number of ways,” Tetangco said.

“Some of these include outright fraud, system failure as trading would be exchange platform-dependent and there have been a number of cases reported where the trading platforms have gone out of business or failed, or through the users’ own mistakes when the virtual currencies are stolen from the users’ digital wallet,” he added.