Tech
Why cryptocurrencies are making a comeback in the Philippines
Cryptocurrencies are once again big in the Philippines.
It first took off during the COVID-19 lockdowns in 2021 with a now-defunct video game called Axie Infinity, in which players earned money — often more than minimum wage — through non-fungible tokens, or NFTs.
Of course, the cryptocurrency winter soon followed with the implosion of FTX in 2022, but now cryptocurrencies are back in a big way in the island nation.
Meghan McCarty Carino of Marketplace spoke with journalist Eli Tan, who recently visited and wrote about the scene for the New York Times.
The following is an edited transcript of their conversation
Eli Tan: I went to the internet cafes that had sprung up around Manila. Every evening it was packed with people who came to play these games as a full time income. I visited farms where real farmers were harvesting virtual crops on their phones to earn money that they were using to expand their farms. I talked to people who were, are “OFW.” So they are overseas Filipino workers, and they basically earned enough money through cryptocurrencies to go back home to the Philippines, to their families, and now they call themselves overseas metaverse workers. So yeah, it was a crazy thing to witness.
Meghan McCarty Cute: Yes, it explains a little more about the people who farm cryptocurrency in these metaverse games. Is this the main way he comes back?
Tan: Yes. So there’s this game called Pixels, which is very popular, which is a farming game, which kind of replaced Axie Infinity, which was the other game. And if I can briefly explain how the games work, because it’s a little confusing: Just imagine a normal phone game that has some sort of virtual currency. Think of, I don’t know, Angry Birds or Candy Crush, some game where you earn a currency called gems, gold, diamonds or whatever it is. But what makes these games unique is that you can take that currency, and you can actually move it out of the game and sell it, in this case, for pesos or dollars, or whatever it is. So that’s pretty much how games work. So yes, these farmers love this game. I spoke to the founder of the game and he said that Filipino farmers are constantly messaging him and telling him how to make the game more realistic. And they’re sending him crop schedules and watering routines and all kinds of things.
McCarty Cute: What are the factors that have made cryptocurrencies so popular in the Philippines?
Tan: Well, if you look at the demographics of the Philippines, this is a country where a lot of people don’t have bank accounts: almost half of the people don’t have bank accounts. But almost everyone has access to the Internet, and most people own a phone. So it’s a perfect environment for people to use cryptocurrencies in a place where, I’m told, the traditional banking system has failed, especially in rural provinces where many people were not born in hospitals. They don’t have an identity document, they can’t open bank accounts. But they can buy cryptocurrency. The other thing is that the Philippines has long been an early adopter of technology. In the [1990s] it was the text messaging capital of the world. In the mid-to-early 2000s, it was the social media capital of the world. I mean, Filipinos have always been kind of curious and at the forefront of a lot of these technological movements, and cryptocurrency is kind of those things that they’re really used to.
In 2021 it truly seemed like every cryptocurrency enthusiast’s dream. I mean, people traded the currency of this game [in] Axie Infinity — Smooth Love Potion was the name of the currency. And people went to the grocery store, to the gas stations, and just bought things in cryptocurrency. They didn’t even have to transfer in pesos. This is really the only time cryptocurrency, in my opinion, has truly worked for its intended purpose of being used as a separate currency from the traditional banking system.
McCarty Cute: And then there is the economic aspect. It seems that many people are turning to cryptocurrencies as a way to create wealth in an economy where it is very difficult to do so. This has been a bit of a theme with cryptocurrencies everywhere.
Tan: Yes. And this is also where there is some of the concern. I mean, if you look at the Philippine economy, there’s not a lot of manufacturing power there compared to places like Indonesia. It relies heavily on these IT jobs, or jobs in places like call centers — a lot of them, I’m told, could be replaced by artificial intelligence, and people are really worried about that. But I think the concern is that cryptocurrency is a dangerous thing to invest in or get into, it’s very volatile. And these plays are even more volatile than the traditional assets you think of like bitcoin and ether. So I think that while a lot of people are excited about what this new movement could bring, there’s also a lot of fear, and fear on the part of the government, about what could go wrong.
McCarty Cute: That’s right, cryptocurrency itself is somewhat risky and speculative. And then there are also the kind of scams and frauds that tend to follow.
Tan: Yes exactly. There are many scams and frauds, even by crypto standards in the Philippines. There are a lot of phishing scams where people trick other users into thinking there’s some kind of freebie or some kind of gift and they click on a link and then try to drain their crypto wallet, or there’s this scam called pig slaughter, where basically people will send you a text or message on Facebook, pretend to be someone else who needs something and try to scam you this way. So these two are the common ones that I’ve found that tend to prefer using cryptocurrency because it’s harder to trace back or reverse like you would if you were transferring funds from a bank account.
McCarty Cute: So you write that all this presents a bit of a conundrum for the government. I mean, clearly, there are some big risks here. But there are some advantages to this resurgence. I mean, how did the officials respond?
Tan: You know, officials are a little mixed on this. Most officials at the Securities and Exchange Commission declined my interview requests, but I was able to dig up some transcripts of past speeches and old videos of speeches they had given at cryptocurrency conferences. And I’ve found that I’m really struggling with this, because on the one hand, it could be an economic boon to an otherwise struggling economy. But then, one of the SEC commissioners basically talked about how he was supposed to meet with a lot of the leadership of FTX, which is the defunct cryptocurrency exchange, the day they went bankrupt due to expanding into the Philippines. He was basically talking about, “Look, it would be a sign of economic opportunity. But if we had allowed more Filipinos to invest their money in FTX, it would have been a disaster.” So I think they’re very aware of that. And they are evaluating what the risks are. But they also said that they basically openly stated that they were more pro-crypto than the US Securities and Exchange Commission. So yes, there are many interesting aspects.
McCarty Cute: Does the Philippines regulate cryptocurrency markets right now?
Tan: Regulates cryptocurrency markets. And in the last year, he’s made this big push to push Filipinos towards exchanges and SEC-approved companies and to outlaw a lot of products that he doesn’t consider super safe. But as is the case with cryptocurrencies, people can choose to use the services they want.
McCarty Cute: Why do you think the Philippines is seeing this renewed interest in cryptocurrencies now?
Tan: Well, a lot of it has to do with these bitcoin-endorsed ETFs offered by these huge financial institutions like BlackRock and Fidelity, where there’s just a lot of institutional money that’s coming into the system. And the price of coins is increasing. There is just more money in the system to pay out to users and give out as rewards. Now, because basically, players can once again make minimum wage or double minimum wage, that’s what brought them back, whereas a few months ago they were maybe only making, you know, a tenth of minimum wage.
McCarty Cute: You’ve been involved in cryptocurrencies for a while now. I’m curious about the popularity of cryptocurrencies and what cryptocurrency means in a place like the Philippines. It kind of tells us something more broadly about the cryptocurrency universe and where it might go and what it means?
Tan: Yeah, I mean, what’s interesting to me is I feel like years ago, in 2021, there was all this talk about the metaverse and Web3 and all these really nebulous terms that cryptocurrencies were kind of the future all this stuff. And venture capitalists invest all this money in these visions, right? And it just didn’t work. But whatever the reason, it worked in the Philippines. It’s the only place where these things have actually come to fruition. According to game developers’ estimates, around 30% of the world’s cryptocurrency players are located in the Philippines. It really is heaven for these things. I don’t really know what that says about the broader movement. I think most people at this point are pretty pessimistic about whatever Web3 or the metaverse is, but in Southeast Asia and the Philippines it’s very much alive and has become a lot of people’s livelihood.
It’s not just the Philippines that has become a cryptocurrency hot spot: several Southeast Asian countries have, according to Forbes.
Vietnam and Indonesia are considered relatively crypto-friendly and, like the Philippines, have large unbanked populations and a large population of migrant workers who regularly send remittances home.
As the article points out, sending money internationally through traditional channels can incur high transaction fees, but with cryptocurrencies this isn’t a big deal.
Indeed, in 2023, overseas Filipino workers – a term mentioned by Eli Tan – sent remittances worth a record $37 billion.
And speaking of 60% of the so-called OFWs are womenwho often leave their families for months or years to go and work abroad.
For his story, Eli Tan spoke to a former preschool teacher who now runs a cryptocurrency guild, teaching tens of thousands of members, many of them Filipinos working overseas, how to trade and invest in cryptocurrencies.
She said that with the cryptocurrency markets recovering, many of those women now earn enough to return home to their families.