The Bangko Sentral Sentral ng Pilipinas said Tuesday it is not prohibiting the use of cryptocurrency in the financial system, but it remains cautious on the possibility that it may be used for money laundering.
A cryptocurrency, like bitcoin, is a virtual currency that uses cryptography for security.
Bangko Sentral Governor Nestor Espenilla Jr. said at the sidelines of the 12th Philippine Forum of The Asset at Conrad Hotel in Pasay City that the use of cryptocurrency could promote the efficient money transfer services.
“But we also realized that cryptocurrency can be used for such schemes like money laundering and other criminal activities. So our approach [is that] we issued regulations earlier this year,” Espenilla said.
“We have actually allowed the use of cryptocurrency in remittance services but we also impose obligations to [operators] to fill Anti-Money Laundering commitments and reporting requirements… and also put in place basic consumer protection arrangement,” he said.
Espenilla said rather than prohibiting the use of cryptocurrency would be very difficult, the Bangko Sentral chose to engage the industry.
“So we agree to a suitable environment. As for the Bangko Sentral itself considering cryptocurrency? That’s an experiment but we are not yet there. There’s a lot of experimentation going on in some countries. We’d like to see first how that works. So in a way, it’s cautious but it’s also not prohibiting,” Espenilla said.
He said the idea of central banks creating their own cryptocurrency was a concept that was actually discussed in meetings he attended in Washington D.C. recently.
He said cryptocurrencies were created outside of the government and that’s one of the reasons why it could pose problems.
Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies.
Bitcoin, created in 2009, was the first decentralized cryptocurrency. Since then, numerous cryptocurrencies have been created. These are frequently called altcoins, as a blend of bitcoin alternative.
Bitcoin and its derivatives use decentralized control as opposed to centralized electronic money/centralized banking systems. The decentralized control is related to the use of bitcoin’s blockchain transaction database in the role of a distributed ledger.