Philippines’ Crypto Journey: Between Regulation and Financial Freedom

Located in the western Pacific, the Philippines is an archipelago of over 7,000 islands and is already established as a popular tourist destination for Europeans (according to Europa Press, more than 19,000 spanish tourists visited the Philippines in 2022). While tourism is crucial for this economy and the country offers great opportunities for students looking for work, wages are low. This has made the Philippines one of the largest recipients of remittances globally.

As many know, sending money from abroad often entails frustrating waiting times, bureaucratic hurdles, and high fees. That’s why cryptocurrencies, especially Bitcoin, have become such a convenient alternative for Filipinos. Currently, educational institutions and the private sector are actively educating the country’s residents about crypto. This has inspired us to write this article about cryptocurrency adoption in the archipelago.

Similar to China, Iran, and Nigeria, the Philippines faces bureaucrats attempting to discourage crypto use through coercive laws. However, these efforts encourage individuals to continue trading and conducting mining operations. The problem is that political interventions may cause disruptions that are felt for a while.

In late April, reports emerged that traders in the Philippines faced higher trading fees and a reduced selection of tokens due to the Securities and Exchange Commission’s veto on Binance, currently the world’s largest crypto exchange by trading volume. The National Telecommunications Commission (NTC) ordered ISPs to block access to Binance on March 25, with the SEC demanding its removal from Apple and Google stores on April 23.

“The SEC has identified Binance and concluded that the public’s continued access to these websites/apps poses a threat to the security of the funds of investing Filipinos”.

As expected, users saw this as a freedom restriction. However, such measures won’t deter people from continuing to trade or receive remittances. In the latest Chainalysis Global Crypto Adoption Index, the Philippines ranked an impressive sixth, surpassing countries like Indonesia, Pakistan, Brazil, China, Japan, and Canada. If you’re planning to start a crypto-related business, capturing Filipino market interest should be a top priority.

In July 2023, Donald Lim, founder of the Blockchain Council of the Philippines (BCP), discussed with Cointelegraph his belief that Blockchain and Web3 projects can thrive in the country. Lim highlighted that upon noticing the increasing prominence of Web3, BCP organized Philippine Blockchain Week. This event facilitated valuable connections and strategic alliances, unveiling the extensive ecosystem within the Philippines.

“We feel very strongly that we can be the blockchain capital of Asia. We realized that we have the technical know-how, we’re very young, we have a 25-year median age, and in terms of adoption, we can adapt fast, like what happened with Axie Infinity”.

Lim mentioned that the Philippine government “has an open mind and is not looking to attack the sector” … Of course, Donald had no idea what would happen several months later—specifically, the events involving Binance. On another note, his mention of Axie Infinity underscores the game’s immense popularity in the country. In 2021, over 29,000 people in the Philippines downloaded the game, with many using their earnings to cover their children’s school fees or even purchase land to build homes.

Interesting data about the digital economy/crypto sector in the Philippines:

• According to Coin ATM Radar, there are currently 44 crypto ATMs in operation.
• Eli Remolona, the Philippines Central Bank chief, has announced plans to introduce a wholesale CBDC in the coming years. However, the institution has no intentions of rolling out a retail version due to concerns over potential bank runs.
• In the Philippines, crypto earnings below 250,000 Philippine pesos are tax-free, equivalent to just over $4,200 at the time of writing. Income ranging from 250,000 to 400,000 pesos incurs a 20% tax on the excess amount. For example, if you earn 300,000 pesos, you’d pay a 20% tax on the additional 50,000 pesos, totaling 10,000 pesos.
• In 2023, the Swedish company Divly published a report on crypto users’ tax compliance, revealing that globally, only 0.53% of crypto owners paid taxes in 2022. The Philippines recorded the lowest compliance rate worldwide, with just 0.03% of investors fulfilling their tax obligations.

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