by Femme Angela Armamento
The pandemic inflicted a heavy blow to our country. Along with the disruption it brought to the economy were the long-term repercussions to our work and way of life. The Bangko Sentral ng Pilipinas (BSP) even expressed that there is a compelling reason to improve financial literacy and capability to help Filipino families cope and recover from the impact of the global coronavirus pandemic.[1] Be that as it may, finding the right resources and awareness of financial literature during this pandemic is still inaccessible to many.
One of the well-known kinds of investment today is called Cryptocurrency. In the Philippines, it is known as a type of a virtual currency that uses cryptography as method of storing and transmitting of data in an unreadable form so only the intended receiver can decipher and process the same.[2] Simply put, it is decentralized digital money based on blockchain technology. People use cryptocurrency to purchase regular goods and services, while some people directly invest in it just as they would in other assets. The most talked about version of it in the internet is called Bitcoin.[3] Bitcoin is a decentralized digital currency that one can buy, sell, and exchange directly without the need of an intermediary such as a bank. As said by its creator, all Bitcoin transactions exist on a public ledger accessible to everyone, making transactions hard to reverse and difficult to fake. Bitcoins, however, aren’t backed by the government or by any issuing institution, making it difficult to guarantee their value besides the proof available in the system.[4]
As with anything novel, cryptocurrency took time to progress and for people to believe in its value, especially since money was involved. Cryptocurrencies started when Bitcoin was first launched in 2009 and its existence had its fair share of ups and downs in the market. [5]
And then the pandemic hit—where almost everyone was forced to work from home. Several day-to-day transactions became restricted to online. One of the major shifts that caused crypto revolution was when the internet broke the news that big companies such as Tesla wanted Bitcoin on their balance sheet and bought $1.5 billion worth of it. The companies, MasterCard, PayPal, and Venmo started to incorporate Bitcoin and allowed their exchange of digital payments using cryptocurrency after such announcement from Tesla.[6] In a world becoming rapidly digitalized, investment online become more appealing than ever.
Indeed, when big companies created the credibility and potential gain from these kinds of investments, people would most likely follow such trust. It has been reported that Philippines is one of the world’s fastest adopters of cryptocurrency as the pandemic powered its value. Filipinos started to realize the significance of crypto and used them as an investment and income-generating currency. Experts from the BSP stated that reliable early indicators for the upsurge of crypto’s growth in the country are the usage of gaming rewards, remittances, ATM networks and rural banking integration. And to safeguard its integrity, the BSP launched a new security framework that would secure cryptocurrency against illegal acts such as money laundering. These regulations are designed to protect the trust of the investing public and expand the scope of consumer protection and cybersecurity controls.[7]
Initially, BSP issued an advisory in 2014, which informed the public of the features, benefits, and the risks it follows when using virtual currencies.[8] And in 2017, BSP issued another advisory warning the public about the alleged fraudulent groups that tried to entice people to invest in VCs packaged as Initial Coin Offering.[9] Such advisory warns the public to stay vigilant and cautious when dealing with VCs since BSP still does not endorse it as a currency or an investment instrument. Nevertheless, due to the continuing demand of using virtual currencies for payments and remittances in the country, BSP established a formal regulatory framework for VC Exchanges – Circular No. 944 dated 6 February 2017. It requires virtual currency exchanges to properly register with the BSP as remittance and transfer companies. And in effect, they are to place adequate safeguards to address the risks associated with virtual currencies.[10] Violation thereof would result to license revocation and supervisory actions by the BSP.
Using virtual currencies as a form of payment is truly a lifesaver. And during this time where most of the available assets in the stock market have bearish results, investing in cryptocurrency can be considered as an alternative tool to invest in for the time being. However, BSP emphasized that they still do not encourage the public to use it as an investment tool because of its highly speculative risky nature. In view of the potential risks and price volatility of cryptocurrency, people should certainly educate themselves and fully understand its concept before voyaging with their money on the line. One should not thoughtlessly follow the trend and be blinded with the desire for quick return of money.
Today, as we take extra precautions in our daily lives, the availability of online payments and transactions are heaven-sent. Taking most of our tasks online lessen our chances to be affected with the virus since we can accomplish daily errands online, at home, and without the need to go outside. But of course, as it is with everything we do and decisions we make, there are certain risks that follow such blessing. As any prudent person would entail, one should act with the proper care, knowledge and diligence before involving your money with matters like this. A little precaution will not hurt anyone.
So, to the question, Cryptocurrency: Yay or Nay? The answer would really depend on the risk appetite of a person. If you are one of a risk-taker and have the means to gamble on such field, then it may not be a problem at all. But if you were one of a risk-averse investor, it would be probably be safer to invest in other assets, which would suit your preference of risk. But given the chance to choose, one should still be cautious when dealing and transacting with such investments at large. ∎
[1] Lawrence Agcaoili, Pinoys need to improve financial literacy – BSP Philstar.com (2020), https://www.philstar.com/business/2020/07/14/2027722/pinoys-need-improve-financial-literacy-bsp (last visited Jun 8, 2021).
[2] BSP, https://www.bsp.gov.ph/Media_and_Research/Primers%20Faqs/VC.pdf (last visited July 6, 2021).
[3] Kate Ashford, What Is Cryptocurrency? Forbes (2021), https://www.forbes.com/advisor/investing/what-is-cryptocurrency/ (last visited Jun 8, 2021).
[4] Kate Ashford, What Is Bitcoin And How Does It Work? Forbes (2021), https://www.forbes.com/advisor/investing/what-is-bitcoin/ (last visited Jun 8, 2021).
[5] Jake Frankenfield, Bitcoin Investopedia (2021), https://www.investopedia.com/terms/b/bitcoin.asp#:~:text=Launched%20in%202009%2C%20bitcoin%20is,system%2C%20known%20as%20a%20blockchain. (last visited Jun 8, 2021).
[6] Editor EBR, Bitcoin and It’s Constantly Rising Popularity The European Business Review (2021), https://www.europeanbusinessreview.com/bitcoin-and-its-constantly-rising-popularity/ (last visited Jun 8, 2021).
[7] Joanna England, Cryptocurrency to become mainstream in the Philippines: Digital Payments Fintech Magazine (2021), https://fintechmagazine.com/digital-payments/cryptocurrency-become-mainstream-philippines (last visited Jun 8, 2021).
[8] BSP. (2014, March 06). Warning Advisory on Virtual Currencies. https://www.bsp.gov.ph/SitePages/MediaAndResearch/MediaList
[9] BSP, https://www.bsp.gov.ph/Media_and_Research/Primers%20Faqs/VC.pdf (last visited July 6, 2021).
[10] BSP. (Circular no. 944 Series of 2017). Guidelines for Virtual Currency Exchanges. http://rbap.org/2017/03/bsp-circular-944-guidelines-for-virtual-currency-vc-exchanges/