May 3, 2019 – Last week, BitPinas and several news outlets broke the news on Bitspark’s launching of a Peso Stablecoin. Bitspark, a Hong Kong-based cryptocurrency exchange revealed its plans to create multiple stablecoins pegged against the national currencies of different countries, all in order to make remittances faster and cheaper.
This week, we spoke to Bitspark CEO George Harrap to know more about this new undertaking and his general view of the Philippine cryptocurrency space.
The Significance of Peso Stablecoin
According to Mr. Harrap, sending money using cryptocurrency usually involves 1) pre-funding balances in advance 2) managing exchange rates 3) buying locally in HK to profitably sell in PH, etc.
Mr. Harrap said operating via stablecoins enables them to reduce counterparty risks and increase price efficiency (meaning better pricing via stablecoins than via BTC).
“This prompted us to issue Peg.PHP, our first Philippines Peso pegged stablecoin and unlike others that rely on collateral held at some third party, peg.PHP is collateralized in cryptocurrency publicly viewable on the blockchain in a smart contract – no need for banks or other counterparties.”
On Informing the Bangko Sentral ng Pilipinas
BitPinas readers surely remember the news about the bank RCBC joining IBM’s new cross border payment system called World Wire. RCBC said it will launch a Peso-backed stablecoin on World Wire but only upon approval of the Philippine Central Bank.
This lead this writer to ask if it’s necessary for companies planning to issue stablecoins to inform the Central Bank first before doing so. Mr. Harrap said there is no need to.
“Bitspark is a Hong Kong-based company not incorporated or having any operations in the Philippines and peg.PHP is a decentralized smart contract with collateral backing held in cryptocurrency on the blockchain issued by anonymous users on a Decentralised exchange. As such we were not or are not obligated to inform the central bank of the Philippines as we are also not the issuer, anyone can interact with the smart contract and issue themselves.”
Note: At the moment, Bitpinas is also clarifying the matter with the BSP.
On Mobile App Launch and Billing Partners
Bitspark’s website confirms they are planning to launch a mobile app soon. If they will issue a Peso Stablecoin, billing partners (those who will accept it) are a necessary part of the ecosystem. To which Mr. Harrap said they are “in the process of rolling out billing services for users to pay bills with peg.PHP” through the mobile app. It has a target release date of late Q2 2019.
On Why Cryptocurrency Should Be Used to Send Money From Hong Kong to the Philippines
There is this most interesting situation with regards to remittances: specifically between Hong Kong and the Philippines, money transfer fees are almost close to 1%, beating out crypto especially during periods of volatility. (Bitcoin’s extreme volatility in late 2017 caused transaction fees to increase drastically. Thankfully, new implementations such as the Lightning Network are being worked on to make sure this does not happen.)
Mr. Harrap said that for Bitspark, while they used crypto, users – specifically the ones who will receive the money – mostly don’t even know that the entire transaction is settled via cryptocurrency.
“In many cases, OFWs who use money transfer companies in HK which use the BitSpark system, however, were not even aware of the crypto settlement that happened behind the scenes.”
He also said that users not being aware of the crypto settlement is not as important as the money getting into the hands of the end user:
“For the most part, customers don’t care how the money gets there only that it arrives in cash for collection by their family and friends – crypto or not.”
Why use peg.PHP (Peso Stablecoin) vs traditional methods?
The general belief is that it is safer to keep money in banks, but Mr. Harrap argued that there’s a risk of problems happening to banks or to companies with bank accounts.
“Traditional channels may use BitSpark and by extension, peg.PHP but often the end customer does not need to know or understand the technical workings and instead just continue to transact via their traditional channel. We see this as a way forward to introduce stablecoins without the need for understanding blockchains directly.”
On Current Cryptocurrency Regulations (or lack thereof) in the Philippines
Remember that Bitspark is one of the first to pilot a remittance corridor using blockchain between Hong Kong and the Philippines. That was in 2014 with local partner SCI Ventures through its platform Rebit. The circular 944 from the BSP was released in 2017.
Mr. Harrap thinks the reason why the Philippines became a leader in cryptocurrency adoption is that the local crypto companies were able to operate freely in an open environment. Therefore, Mr. Harrap thinks a more hands-off approach when it comes to regulation will make the market more non-restrictive especially to newcomers.
“We saw this growth first hand and would welcome regulators to take a more hands-off approach which will ensure the market development and investment continue to flow into the Philippines as we believe the Philippines has been the leader in cryptocurrency adoption in Asia.”
We thank Mr. George Harrap for the interview.
This article originally appeared on BitPinas: [Interview] BitSpark CEO Explains the Importance of Peso Stablecoin (and Stablecoins in General)