Blog | Crypto’s challenges in the Philippines and beyond

By Melvin De Vera

While one of the major goals of the recently announced Crypto Valley of Asia (CVA) in Cagayan is attracting global crypto and fin-tech companies to locate there, we also need great Filipino enterprises in the space to have presence there.

There are already a handful of successful Filipino crypto and fin-tech companies, such as Satoshi Citadel Industries and Acudeen, which recently had a very successful ICO. We need more startup founders to launch ventures in this space, however. To successfully do so, they must have a keen macro-level understanding of the crypto industry in the region.

Southeast Asia is poised to earn its place as a regional powerhouse in the Pacific Century and become the world’s most dynamic growth sector. However, it has done so largely without the benefit of a fintech infrastructure that would support cryptocurrencies such as Bitcoin.

Experts agree the region stands to benefit even more from the wider acceptance of blockchain, the heart of cryptocurrency, yet the countries that make up Southeast Asia continue to be saddled with a number of obstacles that prevent their respective financial sectors from bringing this game-changer into the hands of the people.

The following are the main factors preventing the mass adoption of cryptocurrency that aspiring crypto founders in the Philippines must be aware of in order to successfully build ventures in this space:

• Education

There lingers the notion that cryptocurrency and blockchain are arcane concepts that are practically impossible to grasp for Southeast Asians, despite the great amount of buzz created since blockchain’s introduction in 2008 by Satoshi Nakamoto as a decentralized database that essentially does away with a central server or the need for access control.

Despite the huge amount of resources that have gone into breaking down their technically challenging concepts, acceptance has so far been slow throughout the region largely due to misconceptions.

There is also the fear that crypto funds, as virtual assets, could easily vaporize or get deleted inadvertently by just about anyone with a computer, and such apprehension serves as a deterrent from getting into the space.

• Security

Perhaps this is the most fundamental issue not only against cryptocurrency but electronic trading in general, as seen in the number of scams, tricks, and thievery involving huge sums of legal tender and also bitcoins — for instance, the Mt. Gox hack and the latest problems involving Bitfinex and BTC-e.

It also involves trust as seen in currency risk, and together with volatility, this is the biggest obstacle in the acceptance of cryptocurrency in Southeast Asia and even in other parts of the world.

• Volatility

It does not help that cryptocurrency prices have fluctuated like fine sawteeth in global markets, and it has done nothing to endear the region’s more traditional investors. For instance, it is not uncommon for the price of Bitcoin and Ether and any other cryptocurrency to rise 30 percent and fall 35 percent by midmorning, only to regain by 40 percent at day’s end.

Traders, on the other hand, celebrate this very volatility by cashing in on its gains, which unfortunately detracts attention from the greater picture, which is the underlying technology of blockchain and its enormous potential in breaking down the barriers to entry in a number of applications.

Among others, this has resulted in relegating cryptocurrency as a digital speculative asset instead instead of being the new medium of exchange.

• Scalability

The lack of infrastructure to support blockchain and cryptocurrency in Southeast Asia has prevented the accommodation of new users, leading to a number of market inefficiencies such as the absence of scalability in terms of transaction and unexpected fees.

In fact, not only is this a problem in and of itself, but the tension generated by the discussions about it can just be as bad, which has led to panic sales, the rise of competing protocols, and plain confusion for new users.

Crypto rises in Asia

Despite the challenges that cryptocurrency faces in Southeast Asia, there is hope. There are several innovators across the region who are working to solve these individual problems, or in some cases two or more of them. Crypto founders in the Philippines would be wise to study how they are solving crypto’s most pressing issues, as it provides a roadmap for how they may do so as well.

As of present, most fin-tech and crypto companies in the Philippines are focused inward: They are founded here to serve Filipinos. It’s worth studying other companies because they show that crypto tech can be exported in the region and even the world.

As long as we address the inherent challenges of crypto in and through our solutions, we can make a mark on the global industry comfortably from our seat in Cagayan’s newly christened Crypto Valley of Asia.

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