CHAPTER 2
REVIEW OF RELATED LITERATURE AND STUDIES
This chapter presents the review of related literature and studies that are relevant
to the study. It also discusses the theoretical and conceptual framework that gives deep
understanding of the study.
Related Literature
The regulatory landscape for cryptocurrencies has been a topic of ongoing debate
and discussion in recent years. The potential risks and benefits of cryptocurrencies,
including the potential for increased systemic risk, amplified market volatility, and
disruption to traditional financial markets, have raised concerns among regulators and
policymakers. Also, various regulatory bodies have issued reports and guidelines to
address the challenges and concerns surrounding cryptocurrencies, features the key
areas such as consumer protection, anti-money laundering, taxation, and financial
inclusion.
The potential for cryptocurrencies has increase systemic risk, amplify market
volatility, and disrupt traditional financial markets based on the Bank for International
Settlements (BIS) (2021), It also emphasized the need for further research and analysis
to better understand the potential risks and benefits of cryptocurrencies. This means that
the increased adoption and trading of cryptocurrencies could have a ripple effect on the
entire financial system, potentially leading to instability and unpredictability. Moreover,
according to the Journal of Financial Regulation and Compliance (2020), provides a
comparative analysis of the regulatory approaches to cryptocurrencies in different
countries. The authors identify key differences in the approaches taken by each country,
including the level of regulatory oversight, types of cryptocurrencies permitted or banned,
requirements for exchanges and other intermediaries, and the role of self-regulation and
industry-led initiatives. The report discussed the diversity of regulatory approaches and
suggests that regulators should consider the benefits and risks of cryptocurrencies when
developing regulations.
The European Parliament (2022), provides a comprehensive framework for
regulating cryptocurrencies in the European Union. The report identifies several key areas
for regulation, including consumer protection, anti-money laundering, and taxation. It also
emphasizes the need for a coordinated approach to regulation across the EU, given the
global nature of cryptocurrencies. The authors recommend that the EU establish a clear
and consistent regulatory framework for cryptocurrencies, including licensing and
supervision of exchanges and other intermediaries. Also, the authors state the need for a
coordinated approach to regulation across the EU, given the global nature of
cryptocurrencies and they recommend that the EU establish a clear and consistent
regulatory framework for cryptocurrencies, including licensing and supervision of
cryptocurrency exchanges and other intermediaries.
An overview of the regulatory approaches to cryptocurrencies taken by various
countries and jurisdictions around the world has been explained. The International
Organization of Securities Commissions (IOSCO) (2020), identify several key trends and
challenges in regulating cryptocurrencies, including the need for coordination and
cooperation among regulators. They also emphasized the importance of considering the
risks and benefits of cryptocurrencies when developing regulations, and recommends that
regulators take a proportionate and risk-based approach. This means that the approach
would involve assessing the level of risk posed by each cryptocurrency, implementing
regulations that are proportionate to the level of risk, and taking a flexible and adaptable
approach to regulation, as the cryptocurrency landscape is constantly evolving. By taking
a proportionate and risk-based approach, regulators can ensure that regulations are
effective in promoting financial stability, consumer protection, and market integrity, while
also minimizing the potential for unnecessary regulatory burdens.
The Federal Trade Commission (FTC) (2020) provides an overview of regulatory
approaches to consumer protection in the context of cryptocurrencies. The authors identify
several key challenges, including the need for clear and concise disclosures to
consumers, the importance of protecting consumers from fraudulent activities, and the
need for effective enforcement mechanisms. This information is useful for regulators,
policymakers, and industry stakeholders to develop effective consumer protection
frameworks for cryptocurrencies. The FTC's overview discussed the importance of clear
and concise disclosures to consumers, as well as the need to protect consumers from
fraudulent activities. Additionally, the FTC emphasizes the need for effective enforcement
mechanisms to ensure that regulatory measures are being implemented and enforced.
The European Systemic Risk Board (ESRB) (2020) concludes that the potential
impact of cryptocurrencies on financial stability is still uncertain, but it emphasized
concerns about the potential for cryptocurrencies to increase systemic risk, amplify market
volatility, and disrupt traditional financial markets. The report recommends that
policymakers and regulators continue to monitor the development of cryptocurrencies and
consider implementing measures to mitigate potential risks. This is a warning that
cryptocurrencies could potentially harm the stability of the financial system, and
policymakers and regulators should take steps to ensure the stability of the financial
system. Furthermore, the European Parliament (2021) found that the current regulatory
landscape for cryptocurrencies in the EU is fragmented, with different member states
taking different approaches to regulation. The report recommends that the EU establish a
clear and consistent regulatory framework for cryptocurrencies, including licensing and
supervision of exchanges and other intermediaries, to ensure a level playing field and
protect consumers.
In addition, the European Consumer Organization (BEUC) (2020) concluded that
consumer protection is a significant concern in the context of cryptocurrencies, as many
consumers are unaware of the risks associated with investing in cryptocurrencies. The
report recommends that policymakers and regulators take steps to improve consumer
protection, including providing clear and transparent information to consumers about the
risks and benefits of investing in cryptocurrencies. Also, according to German Federal
Ministry of Finance (2020) different EU countries have taken different approaches to
regulating cryptocurrencies, with some countries adopting more permissive approaches
than others. The report recommends that policymakers and regulators consider the
benefits and drawbacks of different regulatory approaches and work towards establishing
a consistent EU-wide framework for regulating cryptocurrencies.
A Review of Regulatory Approaches by the Financial Action Task Force (FATF)
(2022) concludes that anti-money laundering (AML) regulations are a significant concern
in the context of cryptocurrencies, as they are often used for illegal activities such as
money laundering and terrorist financing. The report recommends that policymakers and
regulators take steps to strengthen AML regulations and prevent the use of
cryptocurrencies for illegal activities. This means that it emphasizes that cryptocurrencies
are often used for illegal activities, including money laundering and terrorist financing.
Money laundering is the process of making illegal money appear legitimate, while terrorist
financing involves providing funds to support terrorist activities. The FATF's findings
suggest that current regulations are insufficient in preventing these illegal activities from
taking place. As a result, the report recommends that policymakers and regulators take
steps to strengthen AML regulations and prevent the use of cryptocurrencies for illegal
purposes.
The taxation of cryptocurrencies is still a developing area, with different countries
having different approaches to taxing these assets, and governments continuing to refine
their tax policies to ensure fair and clear revenue collection. The European Commission
(2020) finds that taxation is a significant issue in the context of cryptocurrencies, as many
countries have uncleared or conflicting laws regarding taxation of cryptocurrencies. The
report recommends that policymakers and regulators take steps to clarify taxation laws
and ensure that cryptocurrency transactions are taxed fairly and consistently. This means
that lack of clear and consistent taxation laws can lead to unfair treatment and uncertainty
for taxpayers who engage in cryptocurrency transactions. It is essential that policymakers
and regulators take steps to clarify taxation laws and ensure that cryptocurrency
transactions are taxed fairly and consistently.
Financial inclusion is the process of making digital assets and services accessible
to individuals and businesses who have been previously excluded from the traditional
financial system, such as those in underserved or developing regions. This includes
providing access to cryptocurrency exchanges, wallets, and other services that enable
people to store, send, and receive cryptocurrencies, as well as participate in financial
transactions and activities. The European Banking Authority (EBA) (2021) concludes that
financial inclusion is a significant concern in the context of cryptocurrencies, as many
individuals do not have access to traditional financial services. The authors recommends
that policymakers and regulators take steps to promote financial inclusion by providing
access to financial services for all individuals, including those who do not have traditional
bank accounts.
European Securities and Markets Authority (ESMA) (2020) finds that securities
regulation is a significant concern in the context of cryptocurrencies, as many initial coin
offerings (ICOs) have failed to comply with securities regulations. The report recommends
that policymakers and regulators take steps to strengthen securities regulation and ensure
that ICOs are properly regulated to protect investors. this context, ICOs refers to Initial
Coin Offerings. An ICO is a type of crowdfunding event where a company raises funds by
issuing its own digital currency, called tokens, in exchange for cryptocurrencies like Bitcoin
or Ethereum. ICOs are similar to Initial Public Offerings (IPOs), but instead of issuing
stocks, companies issue tokens. In an ICO, investors buy tokens with the expectation that
they will appreciate in value, and the company uses the funds raised to develop its product
or service. However, many ICOs have been criticized for lacking transparency, having
unclear regulatory status, and being prone to fraud.
Related Studies
Adoption is important in cryptocurrency as it increases the number of people and
businesses using and accepting cryptocurrencies, leading to wider acceptance, improved
liquidity, and reduced volatility. The study conducted by Pabustan et. al. (2020), titled
cryptocurrency regulation in the Philippines: a study on the impact of regulatory
frameworks on cryptocurrency adoption, found that a clear and comprehensive regulatory
framework has a significant impact on cryptocurrency adoption, increasing trust and
confidence among investors and users. Conversely, the lack of regulation hinders
adoption, creating uncertainty and ambiguity. The study also revealed that regulatory
clarity and consistency have a positive impact on adoption, as they provide a clear
understanding of the regulatory environment. The study's conclusion emphasized the
importance of balancing competing interests, such as consumer protection, financial
stability, and innovation, in developing a regulatory framework that promotes sustainable
development of the cryptocurrency market. The study's recommendations included
developing a comprehensive regulatory framework, ensuring regulatory clarity and
consistency, fostering collaboration between government agencies, industry stakeholders,
and international organizations, and monitoring and evaluating the impact of regulatory
frameworks on cryptocurrency adoption.
The study conducted by Pabutan et. al. share a common interest in cryptocurrency
regulation in the Philippines, with a focus on the impact of regulatory frameworks on the
cryptocurrency market. However, there are significant differences in scope, methodology,
and focus in this recent study. Aside from that, their study examines the impact of
regulatory frameworks on cryptocurrency adoption, while this study is to propose a
comprehensive
regulatory framework
that ensures sustainable governance of
cryptocurrency in the Philippines.
In other countries, the system of cryptocurrency is often regulated and monitored
by financial authorities, with varying levels of oversight and acceptance. The study
conducted by Guevarra (2019) found that the Philippines has a relatively lenient regulatory
framework for cryptocurrency, which has both positive and negative implications. On the
positive side, the Philippines' regulatory environment is considered welcoming and
flexible, allowing for innovation and entrepreneurship in the cryptocurrency sector.
However, the lack of clarity and consistency in regulations can create uncertainty and
ambiguity among investors and users, while the risk of regulatory arbitrage and consumer
protection are also concerns. In comparison to other countries, the Philippines' regulations
are more lenient than those of Japan, South Korea, and Singapore, but more favorable
than those of Malta, Switzerland, and Gibraltar.
The study by Guevarra and this study on regulating cryptocurrency in the
Philippines share similarities in their focus on the regulatory framework, with both
emphasizing the need for a balance between promoting innovation and protecting
consumers and financial stability. However, the studies differ in scope, with Guevarra's
study conducting a comparative analysis with other countries, while this study may focus
specifically on the Philippines. Additionally, the methodologies and conclusions of the two
studies may differ, with Guevarra's study using a comparative analysis approach and
concluding that policymakers need to strike a balance between promoting innovation and
protecting consumers and financial stability.
Rules and regulations are crucial in the cryptocurrency market because they
provide a framework for investors, businesses, and governments to navigate the complex
and rapidly evolving landscape of digital currencies. Without clear guidelines, the market
can be vulnerable to fraud, scams, and other illicit activities, which can erode trust and
confidence. Regulations also help to establish standards for issues such as consumer
protection, anti-money laundering, and tax compliance, ensuring that cryptocurrency
transactions are transparent and accountable. Likewise, the study conducted by Bautista
et. al. (2018) found that the Philippine regulatory framework for cryptocurrency is
comprehensive and provides clear definitions of key terms, such as "cryptocurrency",
"virtual currency", and "cryptocurrency exchange". The study noted that the regulations
require cryptocurrency exchanges to obtain a license from the Bangko Sentral ng Pilipinas
(BSP), the country's central bank, before operating in the Philippines. Additionally, the
regulations require these exchanges to implement anti-money laundering (AML) and
combating the financing of terrorism (CFT) measures to prevent financial crimes. The
study also discussed that the regulations require cryptocurrency exchanges and other
service providers to verify the identity of their customers through a know-your-customer
(KYC) process. Furthermore, the regulations require these entities to report suspicious
transactions and other financial information to the BSP. The study also found that the
regulations require cryptocurrency exchanges and other service providers to remit taxes
on income earned from cryptocurrency transactions. Moreover, the regulations require
these entities to register with the Securities and Exchange Commission (SEC) and obtain
a registration certificate.
The study of Bautista et. al and this study it both focus on the regulatory framework
for cryptocurrency in the Philippines, the main difference is that Bautista et. al aimed to
review the existing regulatory framework and analyzed the existing regulatory framework
and its components, whereas this study may propose a new framework that prioritizes
sustainable governance. Also, both studies highlight the importance of regulations in
preventing fraud and promoting transparency, but it may differ in exploring in a more
innovative and comprehensive measures to promote sustainable development and reduce
environmental impact in the cryptocurrency industry.
In addition, according to the study of Lorenscia (2021) nowadays, the development
of digital money and the numerous benefits it provides has had a significant impact on
many parts of life. However, it is undeniable that these advances carry a number of
concerns as well. As a result, each country has a different perspective on regulating this
digital money, particularly in terms of its benefits as a payment mechanism. The purpose
of her study is to compare the regulation and legality of using digital money as a payment
mechanism in Indonesia, Singapore, and China by employing the normative legal
research. As the result digital money is not allowed to be utilized as a payment mechanism
in Indonesia. On the other hand, digital money is regarded as an intangible asset that can
be used as a payment method in Singapore. China, on the other hand, has outlawed the
usage of digital money for both investment and payment. Each country has its own
considerations, and there are various things that Indonesia may learn from Singapore and
China's arrangements in order to maximize the benefits of digital money.
The study by Lorenscia and this study on regulating cryptocurrency in the
Philippines share some similarities. Both studies focus on the regulatory framework for
digital money/cryptocurrency, examining the benefits and concerns of using these forms
of digital currency. Both studies also discussed the importance of regulation in addressing
the concerns and maximizing the benefits of digital money/cryptocurrency. However, there
are also some key differences between the two studies. Lorenscia's study focuses
specifically on digital money as a payment mechanism, comparing the regulation and
legality of its use in Indonesia, Singapore, and China. In contrast, this study focuses on
regulating cryptocurrency in the Philippines, examining the specific regulatory framework
and challenges related to this type of digital currency.
The potential for regulation and governance of cryptocurrencies in the Philippines
is crucial to ensure the country's financial stability and security according to Santiago
(2018). The study emphasized the need for a regulatory framework that balances
innovation with consumer protection, as well as the importance of addressing issues such
as money laundering, terrorism financing, and market manipulation. The study
recommends that the Philippine government establish a regulatory body to oversee the
cryptocurrency industry, implement anti-money laundering measures, and provide
guidelines for cryptocurrency exchanges and other stakeholders.
This current research shares similarities with Dr. Santiago's study in that both
emphasize the need for a regulatory framework to govern the cryptocurrency industry in
the Philippines. Both studies also feature the importance of balancing innovation with
consumer protection and addressing issues related to financial stability and security.
However, this study proposes a more comprehensive framework that incorporates
sustainability principles and emphasizes the need for a collaborative approach between
government, private sector, and civil society stakeholders. In contrast, Dr. Santiago's study
focuses more on the potential for regulation and governance, without explicitly addressing
sustainability concerns.
Furthermore, Cordero (2020) proposed a regulatory framework for cryptocurrency
derivatives in the Philippines, focusing on risk management and consumer protection. The
framework consists of three main components such as the registration and licensing
requirements for cryptocurrency derivatives exchanges, capital requirements and risk
management measures to ensure the stability of exchanges and consumer protection
measures. The study also recommends the creation of a dedicated regulatory body to
oversee the cryptocurrency derivatives market, ensuring that it is fair, transparent, and
stable. Here's a summary of the similarities and differences between your study and
Cordero's study on regulating cryptocurrency in the Philippines:
The relation of Cordero’s study on this research is that it both propose a regulatory
framework for cryptocurrency in the Philippines, with a common goal of ensuring the
stability and security of the market. However, there are distinct differences in their focus
and scope and previous study focuses specifically on cryptocurrency derivatives,
highlighting the importance of risk management and consumer protection measures. In
contrast, this study proposes a regulatory framework for sustainable governance,
encompassing a broader scope that covers all aspects of cryptocurrency in the
Philippines. Additionally, while Cordero's study recommends the creation of a dedicated
regulatory body to oversee cryptocurrency derivatives, this study may propose different
measures or institutions to promote sustainable governance.
The regulatory landscape in cryptocurrency is a complex and evolving
environment, with varying degrees of legalization, regulation, and oversight across
different jurisdictions, as governments and financial authorities grapple with the challenges
and opportunities posed by the decentralized and rapidly growing cryptocurrency market.
Based on Brummer (2018) the current regulatory landscape for cryptocurrencies in the
United States is fragmented and lacks a clear, comprehensive framework. The Securities
and Exchange Commission (SEC) has taken a more aggressive approach, viewing many
cryptocurrencies as securities and subjecting them to securities laws and regulations. The
Commodity Futures Trading Commission (CFTC) has focused on regulating derivatives
and futures contracts based on cryptocurrencies. Meanwhile, the Financial Crimes
Enforcement Network (FinCEN) has viewed cryptocurrencies as a form of money and has
focused on anti-money laundering and combating the financing of terrorism (AML/CFT)
measures. The study concludes that this lack of clarity and coordination has led to
regulatory uncertainty and inconsistencies, which can hinder innovation and potentially
harm investors.
The relation of Brummer’s study in this research is the idea that the US has a
fragmented and unclear regulatory framework for cryptocurrency, with multiple agencies
having jurisdiction over different aspects, the Philippines is taking a more proactive
approach towards regulation. The Bangko Sentral ng Pilipinas (BSP), the country's central
bank, is leading the development of regulations, working closely with other government
agencies to ensure a consistent and effective framework. In contrast, this study will
propose a comprehensive regulatory framework for sustainable governance of
cryptocurrency in the Philippines, aiming to provide clarity and stability for investors and
businesses, and align with the country's goals of promoting economic growth.
The cryptocurrency regulation in Singapore: a study of the monetary authority of
Singapore's approach by Yam (2020) found that the Monetary Authority of Singapore
(MAS) has taken a comprehensive and proactive approach to regulating cryptocurrencies,
which has contributed to Singapore's reputation as a hub for cryptocurrency trading and
innovation. The MAS has issued guidelines for virtual asset service providers (VASPs),
which require them to comply with anti-money laundering and combating the financing of
terrorism (AML/CFT) measures. The MAS has also emphasized the importance of
consumer protection, requiring VASPs to disclose key information to customers and to
provide adequate customer support. This recent study focuses on proposing a regulatory
framework for the Philippines, while study of Yam analyzes the existing approach taken
by the Monetary Authority of Singapore. Both studies discuss regulatory frameworks and
it differs in terms of focus, objectives, and approaches.
Synthesis of the State-of-the-Art
The review of related literature and studies serves as a strong foundation for
understanding the regulation of cryptocurrency in the Philippines. The ideas of various
authors and researchers were group based on the similarities.
Regulatory frameworks and approaches in cryptocurrency have evolved
significantly, with various international organizations, governments, and regulatory bodies
establishing guidelines and regulations to address the challenges and concerns
surrounding cryptocurrencies. The International Organization of Securities Commissions
(IOSCO), European Parliament, European Consumer Organization (BEUC), European
Banking Authority (EBA), and Kruger (2020) have all emphasized the need for a clear and
consistent regulatory framework for cryptocurrencies. According to IOSCO, regulatory
bodies need to coordinate and cooperate to address the challenges and concerns
surrounding cryptocurrencies. The European Parliament has emphasized the importance
of licensing and supervising exchanges and other intermediaries, while BEUC has
highlighted the need for consumer protection through clear and concise disclosures. EBA
has emphasized the need for financial inclusion by providing access to financial services
for all individuals, including those who do not have traditional bank accounts. Kruger
(2020) has suggested that regulatory frameworks should be flexible and adaptable to the
rapidly evolving nature of cryptocurrencies.
Ensuring consumer protection and financial stability in the cryptocurrency market
is crucial to prevent potential risks and losses, such as market manipulation, fraud, and
market volatility, which can lead to financial instability and harm to individuals, businesses,
and the overall economy. The European Consumer Organization (BEUC), Federal Trade
Commission (FTC), European Parliament, and Taylor (2019) have all highlighted the
importance of consumer protection in the context of cryptocurrencies. BEUC has
concluded that consumer protection is a significant concern, as many consumers are
unaware of the risks associated with investing in cryptocurrencies. FTC has provided an
overview of regulatory approaches to consumer protection, emphasizing the need for clear
and concise disclosures to consumers. The European Parliament has also emphasized
the importance of consumer protection, highlighting the need for a clear and consistent
regulatory framework. Taylor (2019) has suggested that regulatory bodies should prioritize
education and awareness campaigns to inform consumers about the risks and benefits of
investing in cryptocurrencies.
The importance of Anti-Money Laundering (AML) and Taxation in cryptocurrency
lies in the need for regulatory bodies to ensure that cryptocurrencies are not used for illegal
activities such as money laundering and terrorist financing, while also clarifying taxation
laws to avoid confusion and promote compliance among users. The Financial Action Task
Force (FATF), European Commission, European Banking Authority (EBA), Federal Trade
Commission (FTC), and Lai et. al. (2020) has all highlighted the importance of anti-money
laundering (AML) regulations in the context of cryptocurrencies. FATF has emphasized
that AML regulations are a significant concern, as cryptocurrencies are often used for
illegal activities such as money laundering and terrorist financing. The European
Commission has found that taxation is a significant issue in the context of
cryptocurrencies, as many countries have uncleared or conflicting laws regarding taxation
of cryptocurrencies. EBA has emphasized the need for financial inclusion by providing
access to financial services for all individuals, including those who do not have traditional
bank accounts. Lai et. al. (2020) have suggested that regulatory bodies should prioritize
cooperation and coordination with international organizations to address the global
challenges posed by cryptocurrencies.
Cryptocurrencies have the potential to increase financial inclusion by providing
access to financial services for underbanked individuals, while also necessitating robust
securities regulation to ensure investor protection and maintain market stability. The
European Securities and Markets Authority (ESMA), Pabustan et. al. (2020), European
Parliament, European Consumer Organization (BEUC), and Kruger (2020) have all
highlighted the importance of financial inclusion in the context of cryptocurrencies. ESMA
has found that securities regulation is a significant concern, as many initial coin offerings
(ICOs) have failed to comply with securities regulations. Pabustan et. al. (2020) have
concluded that a clear and comprehensive regulatory framework has a significant impact
on cryptocurrency adoption, increasing trust and confidence among investors and users.
Kruger (2020) has suggested that regulatory bodies should prioritize education and
awareness campaigns to inform consumers about the risks and benefits of investing in
cryptocurrencies.
Gap Bridged by the Study
The rapid growth of cryptocurrencies has created a significant challenge to current
financial systems and regulatory authorities worldwide. In the Philippines, the lack of a
regulatory framework has created an environment where cryptocurrencies are vulnerable
to money laundering and terrorism financing. The absence of clear guidelines for the use
of cryptocurrencies has led to a lack of transparency and accountability, making it easier
for illicit activities to thrive. This has resulted in the need for a regulatory framework that
addresses challenges such as investor protection, anti-money laundering, and taxation.
The gap to be bridged in this study will be the proposed regulatory framework that
is necessary to ensure sustainable governance of cryptocurrency regulation in the
Philippines. Also, the study aims to determine the current state of cryptocurrency in the
Philippines, focusing on its adoption, trade, exchange, and utilization. The researcher will
also examine the challenges faced by crypto assets in the country, as perceived by
selected policymakers and regulators that the other studies did not cover. A proposed
regulatory framework will be put forward to address these challenges and promote
sustainable governance of cryptocurrency regulation in the Philippines.
Theoretical Framework
These theories can provide a framework for understanding the complex issues
surrounding cryptocurrency regulation in the Philippines and help inform the development
of a proposed regulatory framework.
The first theory that will adopt by the researcher is the Regulatory Theory, as
proposed by scholars such as OECD (2001), focuses on the role of government in
regulating markets and industries. In the context of my study, Regulatory Theory can help
explain how the lack of regulatory framework in the Philippines has created an
environment where cryptocurrencies are vulnerable to money laundering and terrorism
financing. Second is the Trust Theory, as proposed by scholars such as Gambetta (1988),
examines the role of trust in building and maintaining relationships between individuals
and organizations. In my study, Trust Theory can help explain how the lack of regulatory
framework has affected trust among investors, regulators, and exchanges in the
cryptocurrency market, leading to a lack of transparency and accountability. And lastly, the
Path Dependence Theory, as proposed by scholars such as David (1985), suggests that
the course of development is influenced by past events and decisions, making it difficult
to change course once a particular path has been taken. In this study, Path Dependence
Theory can help explain how the lack of regulatory framework in the Philippines has
created a path-dependent situation, where it is challenging to establish a new regulatory
framework that addresses the challenges faced by the cryptocurrency market.
These theories are important in this current study as they provide a framework for
understanding the complex issues surrounding cryptocurrency regulation in the
Philippines. By applying these theories, this study can gain insights into the root causes
of the problems faced by the cryptocurrency market in the Philippines and develop a more
comprehensive understanding of how to address these challenges.
Regulatory Theory
Trust Theory
Cryptocurrency
Regulation in the
Philippines
Path Dependence
Theory
Figure 1. Theoretical Paradigm
Conceptual Framework
This study focuses on the regulation of cryptocurrency in the Philippines to propose
a framework for sustainable governance. Cryptocurrency is a digital or virtual currency
that uses cryptography for security and is decentralized, meaning it is not controlled by
any government or financial institution.
The researcher will employ the descriptive research design and non-experimental
quantitative method. This approach combines both quantitative and qualitative research
methods to investigate a research problem. Specifically, it focuses on describing the
current regulation of cryptocurrency in the Philippines in terms of adoption, trade and
exchange and utilization as well as the challenges met of the current crypto assets in
regulating cryptocurrency in the Philippines such as the investor protection, anti-money
laundering and taxation. Moreover, this study will include the proposed regulatory
framework to address challenges and to ensure sustainable governance of cryptocurrency
regulation within the country.
The study will collect data through surveys to gather information and the data will
then be analyzed to draw conclusions and make recommendations for improving the
regulation of cryptocurrency in the Philippines.
The Current Situations of Cryptocurrency in the Philippines in terms
of:
a. Adoption
b. Trade and Exchange
c. Utilization
The Challenges Met of the Current Crypto Assets in Regulating
Cryptocurrency in the Philippines in terms of:
a. Investor protection
b. Anti-money laundering
c. Taxation
Proposed Regulatory Framework to Address Challenges and to
Ensure Sustainable Governance of Cryptocurrency Regulation in the
Philippines
Figure 2. Conceptual Paradigm
Definition of Terms
The following terms are defined in the portion by conceptual and operational
manner respectively to provide a deep understanding of this study.
Adoption of Cryptocurrency.
The process of taking up or adopting
cryptocurrency as a means of payment or investment, including the acquisition of
cryptocurrencies and the use of cryptocurrency-related services (KPMG International
Cooperative, 2017). In this study it will be the current state of adoption of cryptocurrency
in the Philippines.
Anti-Money Laundering in Cryptocurrency. The measures taken to prevent
the use of cryptocurrencies for money laundering or other illicit activities (Financial
Action Task Force (FATF), 2015). In this study it refers to the challenge met of crypto
assets in regulating anti-money laundering.
Cryptocurrency Framework. A set of guidelines, rules, or standards that
provide a structure for the development, implementation, and regulation of
cryptocurrency systems, including the creation of cryptocurrencies, exchanges, and
wallets (International Organization for Standardization, 2018). In this study it will refer to
the cryptocurrency regulatory framework used in the Philippines.
Cryptocurrency Regulation. The act of controlling or directing the behavior of
cryptocurrency transactions, including the creation, distribution, and use of
cryptocurrencies, in order to ensure their stability, security, and integrity (Financial Action
Task Force, 2019). In this study it refers to current situation of the behavior of
cryptocurrency transactions within the country.
Governance. The process of governing or managing educational institutions,
including schools, universities, and other educational organizations, in order to ensure
accountability, transparency, and effective decision-making (World Bank Group, 2013).
In this study it refers to the governing the cryptocurrency.
Investor Protection. The measures taken to protect investors from financial
losses or harm caused by fraudulent activities in cryptocurrency markets (Financial
Industry Regulatory Authority (FINRA), 2016). In this research it refers to the current
challenges met in protecting investors.
Sustainable.
An approach to education that prioritizes the well-being of
students, teachers, and the environment, and aims to promote lifelong learning, social
responsibility, and economic sustainability (United Nations Educational, Scientific and
Cultural Organization, 2015).
Taxation. The process of imposing taxes on individuals or entities that earn
income from cryptocurrency-related activities, including mining, trading, and investing
(Internal Revenue Service (IRS), 2014). In this study it refers to the
Trade and Exchange. The buying and selling of cryptocurrencies on exchanges
or through other means of trade, including the creation of new cryptocurrencies and the
exchange of existing ones (CoinMarketCap Limited, 2019). In this study it will be the
current state of buying and selling of cryptocurrency in the Philippines.
Utilization. The use of cryptocurrencies for various purposes, including payment
for goods
and services,
investment
in
cryptocurrencies
or
related
assets
(Investopedia.com., 2018). In this study it will be the current state of using
cryptocurrency in the Philippines.
CHAPTER 3
RESEARCH DESIGN AND METHODOLOGY
This chapter presents the methodology and research design that will be
used in the study. It contains detailed information of the overall research method to
be used such as the respondents of the study, research instrument, data gathering,
procedure, and statistical treatment.
Research Design
The researcher will utilize the descriptive research design and non-experimental
quantitative methods. The mixed methods approach is a research strategy that combines
both quantitative and qualitative research methods to investigate a research problem. It
aims to achieve a more comprehensive understanding of the problem under study by
integrating the strengths of both quantitative and qualitative methods. The mixed methods
approach can be used in various fields (Davis and Maxwell (2013). The descriptive method
will be used in interpreting the data that will be gathered while the quantitative design will
be used in numerical data and statistical analysis to describe problems and establish
relationships between variables.
Sources of Data
The primary sources of data in this study will be from the respondents’ answers
on the survey while the secondary sources will be from books, journals, and the internet.
Respondents
The researcher will utilize the non-probability sampling which is purposive
sampling to get the respondents from selected cryptocurrency assets. Non-probability
sampling, purposive sampling, is a type of sampling technique where the researcher
selects participants or units based on their characteristics, purpose, or relevance to the
study. In contrast to probability sampling, where every member of the population has an
equal chance of being selected, non-probability sampling involves selecting participants
that are intentionally chosen because they are relevant to the research question or
hypothesis (Babbie, 2016). The researchers will select policymakers and regulators.
Specifically, the Securities and Exchange Commission (SEC), Bangko Sentral ng Pilipinas
(BSP), and the Philippine Economic Zone Authority (PEZA) will be considered, as well as
industry stakeholders such as cryptocurrency investors. Additionally, the study will take
into account the perspectives of supporting professionals from legal and compliance firm
and regulatory technology (Regtech) firm. Moreover, the researcher will choose
Philippines and will serve as the research locale of the study.
Instruments that will be Used
For this study, the researcher will use a survey questionnaire in gathering data
to determine the regulation of cryptocurrency in Philippines determine as well as the
challenges met of the current crypto assets in regulating cryptocurrency.
Data Gathering Procedure
Data gathering took place covering the cryptocurrency in the Philippines. Letters
to the Head of Office will be prepared and will be sent to seek permission to conduct the
survey. Once approved, the researcher will conduct a gathering to the respondents.
All data will be entered into a tally sheet for collation and analysis. Frequency counts
will be taken and used in the data analysis and interpretation.
Statistical Treatment
This study will use a quantitative statistical treatment to deepen the methodological
objectivity of the research design as bases of data analysis which include frequency and
ranking. The frequency count, percentage and ranking will be used for the determination
of the current situations of cryptocurrency in the Philippines and the challenges met of the
current crypto assets in regulating cryptocurrency it will be presented in tables and textual
forms.
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