International Monetary Fund (IMF)
Country : Philippines
Delegate : Geomar Songyap Paat
Topic : Addressing the Emergence of Cryptocurrency
“For this reason, game theory dictates possible
dysfunction when there is market breakdown, when everyone may distrust one another.
There cannot be a total disregard for a central bank or a third party that provides lender of last resort facility.” -DiwaGuinigundo (Deputy Governor of the Central Bank
of the Philippines)
In early 2009, Satoshi Nakamoto, a pseudonymous person or group, released Bitcoin–
the first modern cryptocurrency – to the public. It successfully captured the interest of financial consumers and began the exchange and mining of the currency. By late 2010, dozens of similar cryptocurrencies – including popular alternatives like Litecoin – emerged from the market (Martucci, 2020). Some factors to this enticement include advantages such as (1) easy asset transfer, (2) confidential transaction, (3) lesser banking fee, (4) greater access to credit, (5) individual ownership, (6) adaptability, (7) encryption, and, saliently, the absence of exchange rates that could lead to a more efficient international trade (Finjan, 2018). Regionally speaking, the Southeast Asian region was particularly unforgiving to the emergence of cryptocurrencies (Chin, 2018). Understandably, since it is a decentralized peer-to-peer payment network that has no intermediary or central authority, and that lack of oversight is one of the primary reasons why governments tackled the issue with utmost meticulosity (McWhinney, 2019). Not to mention the multitudes of financial and technological risks such as (1) cyber-risk of crypto- trading platforms, (2) default risk of coin issuers, (3) commingling of assets of service providers, (4) liquidity risk, (5) market integrity risk, (6) misselling and fraud, (7) money laundering, and (8) financing of terrorist activities (International Monetary Fund, 2019).
Withal, the Republic of the Philippines supports regulatedcryptocurrency exchangesin fiat money payment and remittanceas per the formal regulatory framework for Virtual Currency (VC) Exchanges – BSP Circular No. 944. Under this policy, the Philippines also
encourages crypto development with its plans to establish the Crypto Valley of Asia- the first virtual currency sandbox in the region. The Philippines believes that the effort is a reasonable use of cryptocurrencies and its economic potentials. First, there is a determinable demand for virtual currencies in the country. The majority of Filipinos (74%) exhibit awareness of cryptocurrencies,while a substantial portion (53%) evince a strong interest to invest (Organization for Economic Co-operation and Development, 2019).Second, it can help re- establish weak banking infrastructures in the country. The World Economic Forum sees cryptocurrency as a potentially-strong instrument in alleviating poor access to banking services, hyperinflation, and poverty (Lwanda, 2019). Third, the Philippines acknowledges existing threats and is continuously developing itstechnology risk management.Also, the Philippines supports transnational cooperationand has utilized its diplomatic relations in combatting crypto criminality (Wood, 2019).The Philippines believes that cultivating financial innovations is paramount toprotecting the financial consumers-making internationalism most critical than ever.Hence, the Republic of the Philippines proposes a set of conventions(i.e., the LINK-A-G-Eframework) which could guide the policies of the assembly.
1. Link
Countries with increasing participation shall draft intelligence-sharing agreements exclusive to cryptocurrency-enabled organized crime. The deal must adhere to the Right to Privacy under the United Nations General Assembly adopted resolution 68/167 (U.N.
Doc. A/HRC/27/37, para. 37).
2. Adapt
The IMF shall foster cooperation with external organizations (i.e., IOSCO, FSB, FATF, BCBS, among others) in adopting long-term goals (e.g., SDGs) that help to transition and sustain the traditional banking industry currently under threat by cryptocurrencies.
3. Guide
The IMF and the Board of the International Organization of Securities and Commissions shall provide consultative assistance on SECs and national banks. The IMF must also release a formalized convention on the classification of cryptocurrencies to educate the financial consumers (e.g., Swiss approach: (i) securities assets; (ii) payment assets; and (iii)utility assets).
4. Envision
The United Nations Drugs Office on Drugs and Crime (UNODC) shall expand its Cryptocurrency Investigation Train-the-Trainers program. Countries must acknowledge
the international stage while individual states shall integrate specialized law enforcement experts to their national and local grassroots level.
BIBLIOGRAPHY
Chin, C. (2018, August 30). [ANALYSIS] The Philippines' cryptocurrency opportunity.
Retrieved from https://www.rappler.com/voices/thought-leaders/analysis-philippines- cryptocurrency-opportunity
Curevo, C., Morozova, A., & Sugimoto, N. (2019, December). Regulation of Cryptocurrency. Retrieved from https://www.imf.org/en/Publications/fintech- notes/Issues/2020/01/09/Regulation-of-Crypto-Assets-48810
Desfran Research Team. (2020, March 3). Crypto Valley of Asia – The Next Big Thing.
Retrieved from https://www.desfran.com/crypto-valley-of-asia-the-next-big-thing/
Finjan. (2018, January 9). Advantages of Cryptocurrency. Retrieved from https://blog.finjan.com/advantages-of-cryptocurrency/
Helms, K. (2020, January 9). Philippine 'Crypto Valley of Asia' to Get Own Airport.
Retrieved from https://news.bitcoin.com/philippine-crypto-valley-of-asia-to-get-own- airport/
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Lwanda, G. (2019, June 24).Cryptocurrency could help Zimbabwe overcome its economic crisis. Retrieved from https://www.weforum.org/agenda/2019/06/zimbabwe- needs-its-own-cryptocurrency/
Martucci, B. (2020). What Is Cryptocurrency – How It Works, History & Bitcoin Alternatives. Retrieved from https://www.moneycrashers.com/cryptocurrency-history- bitcoin-alternatives/
McWhinney, J. (2019, November 1). Why Governments Are Afraid of Bitcoin. Retrieved from https://www.investopedia.com/articles/forex/042015/why-governments-are-afraid- bitcoin.asp
OECD. (2019). Cryptoassets in Asia: Consumer attitudes, behaviours and experiences.
Retrieved from https://www.oecd.org/countries/vietnam/2019-cryptoassets-in-asia.pdf.
Privacy International. (September, 2017). Human Rights Implication of Intelligence Sharing. Retrieved from http://privacyinternational.org/sites/default/files/2017-11/PI- Briefing-to-National-Intelligence-Oversight_0.pdf
UNHR Office of the High Commissioner. (n.d.). The Right to Privacy in the Digital Age.
Retrieved fromhttps://www.ohchr.org/en/issues/digitalage/pages/digitalageindex.aspx Wood, A. (2019, September 15). Report: Philippine Police Raid Alleged Cryptocurrency Scam, Arrest 277. Retrieved from https://cointelegraph.com/news/report-philippine- police-raid-alleged-cryptocurrency-scam-arrest-277