The Philippines is set to become the first country in Southeast Asia to issue a tokenized bond on the blockchain. The bond, which will be launched next week, aims to raise $100 million for infrastructure projects and financial inclusion initiatives.
According to report on CoinDesk, the Philippines government said it plans to raise 10 billion pesos ($180 million) through the sale of a tokenized treasury bond next week, in the latest move by a government to embrace blockchain technology to digitize its domestic debt market.
The planned sale follows an offering from Hong Kong, which issued an 800 million-Hong Kong dollar ($103 million) tokenized green bond in February. The Philippines Bureau of the Treasury intends to confirm the interest rate of the one-year bond on Nov. 20, with the issue and settlement date set for Nov. 22. It reserved the right to change the mechanics of the issue.
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A tokenized bond is a digital representation of a debt instrument that is issued and traded on a blockchain platform. A blockchain is a distributed ledger that records transactions and data in a secure and transparent way. By using blockchain technology, tokenized bonds can offer several benefits, such as:
Faster and cheaper issuance and settlement, as intermediaries and paperwork are reduced or eliminated. Greater liquidity and accessibility, as investors can buy and sell the bond tokens anytime and anywhere using digital platforms and currencies. Enhanced transparency and security, as investors can verify the authenticity and performance of the bond tokens using the blockchain ledger.
The bond will be issued by the Philippine Bureau of the Treasury (BTr) in partnership with Union Bank of the Philippines (UBP) and the Philippine Digital Asset Exchange (PDAX). The bond will be backed by sovereign guarantees and will have a tenor of one year and a coupon rate of 6.25%.
The bond will be tokenized using the Bond.PH platform, which is powered by UBP’s blockchain infrastructure. The platform will enable investors to buy and sell the bond tokens using fiat or digital currencies, as well as access real-time information on the bond’s performance and cash flows.
The Philippines is one of the most progressive countries in Southeast Asia when it comes to blockchain technology and cryptocurrency adoption. The country has been actively exploring the potential of these innovations to improve various sectors of its economy, such as remittances, banking, e-commerce, and governance.
In this blog post, we will examine the current state of blockchain and cryptocurrency regulation in the Philippines, as well as some of the initiatives and projects that are being implemented or planned by the government and private entities. We will also discuss some of the challenges and opportunities that lie ahead for the Philippine blockchain ecosystem.
Blockchain and Cryptocurrency Regulation in the Philippines
The Philippines has a relatively friendly and supportive regulatory environment for blockchain and cryptocurrency businesses and users. The main regulator for this sector is the Bangko Sentral ng Pilipinas (BSP), which is the central bank of the Philippines. The BSP has issued several circulars and guidelines that provide clarity and guidance on how to operate and comply with the existing laws and regulations.
One of the most important circulars is Circular No. 944, which was issued in February 2017. This circular defines virtual currency (VC) as any type of digital unit that can be used as a medium of exchange or a form of digitally stored value. It also recognizes VC exchanges (VCEs) as entities that offer services or facilitate transactions involving the conversion or exchange of fiat currency or other VCs.
The circular requires VCEs to register with the BSP as remittance and transfer companies (RTCs) and to comply with the rules on anti-money laundering (AML), consumer protection, risk management, and reporting. The circular also imposes a minimum capital requirement of 10 million pesos (about $200,000) for VCEs.
As of October 2021, there are 17 VCEs that have been licensed by the BSP, including some of the leading platforms in the region, such as Coins.ph, PDAX, BloomX, SCI Ventures, and Abra. These VCEs enable users to buy, sell, and trade various cryptocurrencies, such as Bitcoin, Ethereum, Ripple, Litecoin, Bitcoin Cash, and USDT.
Another important circular is Circular No. 1108, which was issued in August 2020. This circular provides guidelines on the establishment or operation of digital asset token offering (DATO) platforms. A DATO platform is defined as an entity that facilitates the offer or sale of digital asset tokens (DATs) to the public within or from the Philippines.
A DAT is defined as a VC that represents the contractual rights or claims to underlying assets such as goods, services, or revenue. A DAT may also have features similar to securities, such as equity, debt, or derivatives.
The circular requires DATO platforms to register with the BSP as an investment house (IH) or an IH subsidiary and to comply with the rules on AML, consumer protection, risk management, reporting, and disclosure. The circular also imposes a minimum capital requirement of 100 million pesos (about $2 million) for DATO platforms.
As of October 2021, there are no DATO platforms that have been licensed by the BSP yet. However, there are some projects that have expressed interest or intent to apply for a license, such as BitPinas Blockchain Inc., which plans to launch a DATO platform called BitPinas Token Exchange (BPX).
In addition to the BSP, there are other regulators that have jurisdiction over certain aspects of blockchain and cryptocurrency activities in the Philippines. For instance,
The Securities and Exchange Commission (SEC) is responsible for regulating securities offerings and transactions, including those involving DATs or other types of tokens that fall under the definition of securities under the Securities Regulation Code (SRC).
The Philippine Economic Zone Authority (PEZA) is responsible for granting incentives and benefits to blockchain and cryptocurrency businesses that operate within special economic zones (SEZs) in the Philippines.
The Cagayan Economic Zone Authority (CEZA) is responsible for granting licenses and permits to offshore blockchain and cryptocurrency businesses that operate within the Cagayan Special Economic Zone and Freeport (CSEZFP) in northern Luzon.
The Department of Trade and Industry (DTI) is responsible for promoting and developing blockchain and cryptocurrency businesses in the Philippines through various programs and initiatives.
The bond tokens will be compliant with the Philippine Securities and Exchange Commission’s rules and regulations, and will be listed on PDAX, the country’s licensed digital asset exchange. Investors will be able to purchase the bond tokens with a minimum investment of 5,000 Philippine pesos (about $100).
The tokenized bond is expected to attract both domestic and foreign investors, especially those who are looking for alternative and innovative investment opportunities. The bond will also provide greater financial inclusion for Filipinos who are unbanked or underbanked, as they can access the bond market through digital platforms.
The tokenized bond is part of the Philippine government’s efforts to promote digital transformation and financial innovation in the country. The government hopes that the bond will serve as a model for other countries in the region and beyond to leverage blockchain technology for social good.