BSP, PDAX collaborate on crypto, fintech sandbox

The Philippine Digital Asset Exchange (PDAX) and the Bangko Sentral ng Pilipinas (BSP) are supporting the development of a crypto-and-fintech sandbox to encourage innovation and technological advancement in the sector. The transition is also in response to rising public interest in alternative investment platforms like cryptocurrencies, owing to a strong change away from conventional to digital financial services.

During the recent virtual forum “The Philippine Financial Sector: Policy Perspectives and Trends,” which was held by the European Chamber of Commerce in the Philippines (ECCP) and the Fintech Philippines Association (FPA), Nichel Gaba, Founder and CEO of PDAX, one of the country’s largest and pioneering cryptocurrency exchanges, explained the importance of building what he called a regulatory sandbox for the digital asset space: “In a regulatory framework, a startup or an entity can test an idea rolling out a product to the market but within the parameters prescribed by a regulator. This framework or sandbox environment ensures that innovative initiatives flourish, while ensuring consumer protection, data privacy and cybersecurity, and that all such technology readily complies with applicable laws and regulations. The private sector and regulator can create an ecosystem for these initiatives.”

He also expressed his enthusiasm for working with the BSP to create and introduce projects that will increase public engagement in the fintech and digital asset spaces while also safeguarding their welfare. “The BSP is a global leader in this space, and we are proud to partner with them on fintech innovations that can help our people make sound investments, increase their income and savings, and prepare for a prosperous future.”

Governor of the BSP Benjamin Diokno agreed that emerging financial innovations, as well as the legal system that supports them, must be nurtured in order to sustain the Philippine economy, which has remained resilient despite the pandemic and is projected to expand by 6.5 to 7.5 percent by the end of the year. The banking sector is also projected to rise by 6.1 percent year over year, with industry assets expected to increase by 6.1 percent.

“As a result of the pandemic, we have seen a rise in usage of fintech platforms,” Governor Diokno said. Not only has the financial system been reshaped by the crisis, but so has the way we communicate and conduct business.” He cited the recent increase in the volume of transactions of the two government-launched interbank fund transfer services, Pesonet reaching P367 billion and Instapay reaching P177 billion by the end of 2020, as examples.

ECCP Innovations Committee Chairperson and FPA Executive Director Amor Maclang agreed with the Governor, saying, “Despite the economic downturn, there is a newfound liquidity among consumers who are wondering, ‘Where do I put my money to produce the best results?'” The Philippines is currently the #3 country with increased activity and membership participation in crypto platforms, indicating that demand has outpaced the system.”

Francesca Montes, UnionBank of the Philippines Vice President, mentioned that her company’s gave another fintech investment option for the public: an app, running on blockchain technology, that enables its users to buy and sell Philippine retail treasury bonds. 

BSP Deputy Governor Dr. Francisco Dakila Jr. said that, moving forward, the government financial institution will be providing both liquidity support and digital transformation in order to empower the private sector and their customer market to conduct safe user-friendly transactions that can spur both individual and organizational economic growth. Innovations like cryptocurrency, virtual bond trading, online fund transfer services, and soon artificial intelligence-powered financial advisors “will make financial transitions more popular to people. We are cooperating with the other government agencies to harmonize our regulations. This is our response to supporting digital innovations in the financial sector.”

Gaba also stressed the importance of the private sector’s cooperation with regulatory bodies especially as more and more digital services emerge and are adopted by the public. He said, “Our regulators have proactively fostered innovation. It’s often taken for granted how serious it is to service customers in the financial services industry. Capital requirements must always be high. The consumer protection standards must always be upheld. It’s incumbent on organizations like PDAX to step up to these requirements, whether in the form of sandbox or actual regulations.”


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