Just a week ago, Filipino congresswoman Kimi Cojuangco introduced a bill in the Filipino House of Representatives that would create a government-backed digital currency that would serve as an official medium of exchange for domestic online payments. This digital currency, known as the “e-peso,” was proposed as part of the E-Peso Act of 2014. The e-peso that would be at par with the country’s official currency the Filipino Peso would be used as legal tender.
Of interest to the bitcoin industry is that in its current form, the bill would require the Filipino central bank, the Bangko Sentral ng Pilipinas (BSP) to study bitcoin technology and model the proposed e-peso on the bitcoin’s blockchain technology. The bill calls the e-peso’s blockchain the “log chain.”
The bill states that the BSP would “choose a system that uses peer-to-peer processing of the log chain.” It further adds that the bank would be required to “leverage existing hardware being used by other leading cryptocurrencies such as bitcoin.” The bill would also require banks to have a dedicated computer at each branch that would act as a node to confirm transactions. Under Filipino law, the bill would be subject to amendments either in the House of Representatives and the Filipino Senate before being sent to the president for assent.
Filipino Bitcoin Community Responds to the Bill
The introduction of the bill is a welcome move. The Philippines received $25 billion in remittances in 2013. This represented a growth of 7.6% over the previous year, contributing 8.6% of the country’s gross domestic product. Bitcoin startup has even launched an app that enables overseas Filipino workers send money directly through the app. They can also top-up mobile phone airtime and eventually pay their bills and those of their families and loved ones.
As the country waits for its lawmakers to make up their minds on the bill, the Filipino Bitcoin community has lent its voice to the proposals. For example, an executive of a bitcoin exchange in Manila said that it could boost the bitcoin’s credibility in the Philippines. Other members of the community have some observations to make on the bill.
Recommendations for the E-Peso Bill
Leading bitcoin blogger Luis Buenaventura feels that as much as the bill is headed in the right direction it nonetheless has the “wrong set of tires.” In his blog Cryptonight, he proposes several areas in which the bill would need to be amended. He faults the e-peso’s block chain explaining that in its current format it will be too expensive to deploy. Using an example that he provides on his blog post, he demonstrates that if the banks were to implement the bill’s proposals in their current format they would be competing at a huge disadvantage in transaction costs. Bitcoin’s transaction fees would be a miniscule 2% of the estimated costs of the e-peso. The e-peso does not have miners, and the responsibility of network security would fall on the banks. It would shift the economic burden without shifting the incentives as well.
Some sections of the bill would have to be reworded so as not to stifle the growth and innovation being experienced in the Filipino crypto-currency space. New apps and new exchanges are providing bitcoin services in the country. Section 9 of the new bill would have to be reworded so as to make clear that other forms of crypto-currency have not been prohibited in the Philippines.
However, ultimately, Mr Buenaventura does feel that the bill seems to be reinventing the wheel. In his view, the country could retain the use of the Philippine Peso, and simply leverage existing bitcoin technology. This could be done even through using SMS, something that could work very well for the country. The Philippines comprises 7,107 islands many of which do not have adequate mobile coverage. It would, therefore, make sense to deploy bitcoin via mobile rather than try to set up a whole new digital currency with the likely and usual teething problems.
Do you live in the Philippines? Share your thoughts on the E-Peso Bill.
Image source: airforcefe; other images from Shutterstock.