How Bitcoin Could Change the Philippines Forever

Brian Gamido

Published in

ZapChain Magazine

5 min readSep 23, 2014

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The Philippines represents a key market for Bitcoin success for several reasons.

1. The Rising Tiger of Asia

Once labelled the ‘Sick Man of Asia’ due to years of sluggish economic growth, the Philippines is now often referred to as the ‘Rising Tiger of Asia’ based on its recent aggressive economic gains. In 2013, the Philippine economy grew by 7.2 percent — the fastest in the region and second only to that of China.

Against the backdrop of a soaring economy, the people of the Philippines have demonstrated their willingness to embrace key consumer technologies. The Philippines has 112% mobile penetration and is a global leader in SMS volumes with over 2 billion text messages being sent per day. The country has the fasting growing smart phone market in the region with 75% year-over-year growth, largely due to smart phone prices falling to as low as $30. The Philippines is also holds the crown as both the social networking capital of the world and the selfie capitals of the world.

2. The Philippines has an enormous need for accessible financial tools

But as the economy continues to soar and as consumers rapidly adopt new technologies, many Filipinos still find themselves excluded from the traditional financial system. A majority of Filipinos are unbanked with 75% of the population without bank accounts. 97% of people in the Philippines don’t have access to credit cards to use as a form of payment. Outside of the country, Overseas Filipino workers (OFWs) don’t have the ability to transfer money back to loved ones in the country at reasonable costs. Over $22B is sent to the Philippines annually from abroad and senders pay 5–8% or more on the amount of money transferred.

For Bitcoin, the Philippines matters

The Philippines matters to the Bitcoin ecosystem because the country represents the confluence of favorable conditions within which bitcoin should survive and grow. Indeed, the Philippines represents fertile ground for Bitcoin which, as a technology and a financial tool, has the potential to radically transform and revolutionize consumer finance in the country.

In the Philippines, bitcoin has the potential to solve key systemic problems also faced by most emerging and developing countries.

Bitcoin enables the ability to send low-cost, near real-time cross-border remittances. In a pure bitcoin to bitcoin transfer, service fee and exchange rate spread costs would effectively be eliminated. This assumes that the sender already has bitcoin and the receiver is comfortable with holding funds in bitcoin.

Additional fees are typically incurred when converting bitcoin to and from fiat forms of currency. But even when you take into account bitcoin-fiat exchange costs, remittance costs can still be lower than traditional methods especially for smaller remittance amounts.

In addition to enabling low cost remittances, Bitcoin can also be used as a fast, efficient, and digital form of payment in contrast to the current cash economy. Bitcoin also allows people to preserve and grow value if they are interested in bitcoin’s use as an asset class.

3. Challenges to adoption

As the saying goes: “Rome wasn’t built in a day.” The same is true about the overall bitcoin eco-system and several factors come into play in the building of the eco-system in the Philippines.

Infrastructure

As counter-intuitive as it may sound, the physical infrastructure of the Bitcoin must be developed and built in order for bitcoin to go mainstream. Particularly in developing countries where people do not have bank accounts to automatically fund their bitcoin transactions, cash-in / cash-out infrastructure is a must. This ‘infrastructure’ can come in the form of bitcoin ATMS or banks and pawn shops that partner with bitcoin service providers to accept or dispense cash for bitcoin. Companies such as Palarin, Bitmarket.ph and coins.ph are building bitcoin infrastructure to make the technology more accessible to the masses.

Price Stabilization

While volatility can be a boon for speculative investors, it can also be a bane for everyday Filipino consumers. To-date, bitcoin prices have been relatively volatile when compared to conventional indices such as the S&P 500. The magnitude of bitcoin volatility typically scares away mainstream users who do not want to be exposed to the currency exchange risk. From this perspective it becomes less practical for your everyday consumer to use bitcoin as a mechanism to hold and preserve value and even use it as a payment method.

Regulation

Whether we like or not, regulation will continue to play a critical role in the adoption of bitcoin by mainstream users. Just as with Goldilocks and the three bears, regulation needs to be ‘just right.’ On one end of the spectrum, the government can chose to stifle innovation and quell new bitcoin companies by force fitting the technology into archaic regulatory frameworks never intended to apply to something like bitcoin. On the other end, under-regulation could have counter-productive implications. Without proper ‘guard rails’, bitcoin could be used primarily for illicit activities perpetuating the stigma that bitcoin is not suitable for regular law-abiding citizens. So far, governing bodies in the Philippines have been relatively lenient with the Bankgo Sentral Pilipinas issuing a consumer warning regarding the digital currency.

4. The next key beachhead market for bitcoin?

It remains to be seen when Bitcoin will go mainstream in the Philippines — and I do believe it’s a matter of when rather than if it goes mainstream. There are concrete and practical uses of the technology in the Philippines today but wider adoption is dependent on critical factors including infrastructure, price stability, and regulation. When these factors are properly addressed, the promises of bitcoin can and will be delivered at scale in a country where bitcoin is logically poised and positioned to take off.

If Bitcoin does not succeed here, can it succeed anywhere?