BLOCKCHAIN” was certainly the hottest topic in the room for all of the 30,000 attendees at Singapore FinTech Festival 2017. Every major bank in the region covered it as an element of their digital transformations. As we enter the next generation of internet-based services, one with less human input and intermediaries involved, we believe Ethereum has the potential to serve as the glue of this Web 3.0 ecosystem.
Developing countries tend to struggle with technology adoption due to developmental and regulatory barriers. In that environment, a sandbox approach will provide regulators a chance to test various innovations while getting the policies and user experience right.
The Philippines can be this sandbox for greater Asia.
The Bangko Sentral ng Pilipinas (BSP) has always had a favorable attitude toward virtual currencies, thanks to the pioneering efforts of early Bitcoin companies Coins.ph, Bloom Solutions, and Satoshi Citadel Industries. While most countries have stalled and continue to debate (or ignore) the issue, the BSP has been swift and timely in releasing its positions, in pace with the growth of cryptocurrencies.
Today, the Philippines has one of the most advanced blockchain payments apps in the world (Coins.ph), which provides 1.5 million Filipinos alternative access to their finances and other value-added services. Filipino regulators were also among the first to announce the regulation of bitcoin as a security.
Room to grow
Continuing the BSP’s national strategy for financial inclusion, the central banks of Singapore and the Philippines announced at SFF2017 that they would collaborate on financial technology by employing the regulatory sandbox approach. This will provide industry stakeholders with the room and time to experiment before regulators enact potentially restrictive policies that could stifle innovation and growth. As part of the agreement, the central banks will share resources, best practices, research, and collaborate to “elevate financial innovation” in both economies.
What does this mean for fintech and blockchain in the Philippines?
Singapore is already a favored destination for fintech startups (especially blockchain companies) due to the city-state’s tax-friendly incentives, government funding, and support. I expect the Philippines to soon follow suit and open its doors for companies with new technology to experiment in the country. The ultimate north star of these initiatives: To better address financial inclusion for the 70 percent of Filipinos who are unbanked and underbanked.
The central bank partnership also moves the country one step closer to seeing a “peso-backed, cryptographic money issued on smart contracts, living on a shared, permissioned decentralized ledger.” I hope to see the BSP joining in the next round of cohorts building a blockchain-based financial system for international real-time settlement and payments.
But first, the foundations of decentralization need to be built.
To build an effective, private, and secure system for this data-shared and streamlined world, we must first lay the foundations and build the applications layer by layer. At the Singapore Fintech Festival, ConsenSys met with the BSP to lay out the systems we are developing (such as Balanc3, OpenLaw, and uPort) that address the social and institutional obstacles blockchain technology faces on the road to mass adoption.
The BSP took interest in the subject of “digital identity” as ConsenSys founder Joseph Lubin described this as the first application layer to tackle and a critical pain-point for FinTech innovation.
Whereas KYC-AML rules can exclude people from accessing basic financial services, blockchain-facilitated attestations allow for alternative and nontraditional trusted sources to prove a person’s identity.
As we’re seeing in uPort’s latest pilot program (registering the citizens of Zug on the Ethereum blockchain), having a verifiable and trackable digital identity can vastly decrease friction, changing the way people, the market, and governments interact with each other.
BSP Gov. Nestor Espenilla commented that the BSP aimed to align with the methodical approach ConsenSys is taking in building the foundations of the blockchain ecosystem. The BSP understands that the country’s regulations must keep pace with how the world works today; to do otherwise would leave fintech as just a daydream.
A changing tide
In the beginning, innovation in the blockchain space was the equivalent of garage startups playing with the technology and developing in silos. For the last three years, ConsenSys has been building decentralized applications (dApps) for a multitude of industries, in anticipation that these industries would one day wake up and learn to adapt or perish.
As a part of the Ethereum Enterprise Alliance (EEA), ConsenSys has had the opportunity to work on use cases with Fortune 500 companies, academics, and technology vendors and to define enterprise-grade software capable of handling the most complex and demanding applications. That work expands further into Asia as the EEA welcomes its first Filipino enterprise applicant, the UnionBank of the Philippines.
Partnerships with companies that are well-integrated into the local ecosystem of developing countries allow us to bring this technology closer to the people who could benefit the most from it.
Every day we come closer to fulfilling one of the greatest promises of blockchain technology: To provide financial access to communities that have been traditionally excluded from participating in the national and global market economy.
Although it’s taken some time, we’re now seeing piqued interest and an appetite for experimentation in the Philippines not only from the banking sector, but from the music industry, government, educational institutions, and utility companies.
I believe that the Philippines and its 100 million people will soon play an integral part in leading the charge in mass market blockchain integration and adoption, at a significantly faster rate than its first world counterparts. This puts the country in a unique position to help define global regulatory and protocol development standards.
Leaders in the country are starting to embrace these disruptive technologies, signaling to the world that the Philippines is ready to innovate and help build this transparent and decentralized future.
Filipinas, mabuhay! And welcome to the beginnings of Web 3.0.
(Aiai Garcia runs global business development, operations, and special projects for ConsenSys in the Philippines, the wider APAC region, and the decentralized Mesh. This article first appeared on http://media.consensys.net.)