BSP: Cryptocurrencies vulnerable to dirty money use, value fluctuation

enablePagination: false
maxItemsPerPage: 10
maxPaginationLinks: 10

Metro Manila (CNN Philippines, May 21) — While Bangko Sentral ng Pilipinas Governor Benjamin Diokno sees how cryptocurrencies could possibly transform the way people conduct financial transactions for good, he has a word of caution for those interested in them.

"They have really the potential to revolutionize the delivery of financial services and further support of financial inclusion," Diokno told CNN Philippines' The Exchange with Rico Hizon, citing Bitcoin and Ethereum as examples.

However, the BSP chief flagged the "very high degree" of anonymity among parties conducting transactions using the virtual assets.

"Therefore it makes them very vulnerable for use in money laundering and terrorism financing. So you have to be wary about that. As a regulator, we should be wary about that," he said.

Diokno likewise cited the frequency by which the values of cryptocurrencies change.

"The value fluctuates so much so how can you make that as a medium of exchange?" he said.

CNN International anchor and correspondent Julia Chatterley told The Exchange in a separate interview that cryptocurrencies were originally made to be a medium of exchange. However, transactions are recorded in a ledger — the crypto part being the protection of data involved as much as possible.

She also noted how this "very early technology" — which utilizes blockchain — is rather "incredibly volatile."

Just this week, Bitcoin — easily the biggest cryptocurrency there is — nosedived to the $30,000 level after China ramped up its crackdown against digital coins as reported by CNN Business.

While it has already climbed above $40,000 as of Thursday, CNN Business noted that Bitcoin has lost over 30% in market capitalization since its $64,000 peak in mid-April.

"When you've got a central bank like China's that's looking at this and recognize both the benefits of a digital currency but also the threats it represents, those are regulators that aren't gonna be afraid," Chatterley said.

This is also the risk for the cryptocurrency market: other regulators stepping in and stating what can and cannot be done, she noted.

This is the case "especially when you have players like Elon Musk coming in, sending out a tweet and that sends the market up 10% one day and down 10% or 20% another day," Chatterley added.

Earlier this month, Bitcoin's value began to sink after the Tesla chief executive officer announced they are dropping plans to accept the digital currency as payment for their electric cars, according to CNN Business. 

But why do people still lean towards cryptocurrencies despite their unpredictability? Chatterley said it's the size of its returns that entice people as everyone seeks ways to make money amid these trying times.

"You have to be very careful about how much money you're putting into this and you have to be willing to take on some very steep losses," CNN's First Move anchor said. "Longer term, this could be a great investment. Shorter term, you have to be buckled up and strapped in and be prepared for extreme, extreme volatility."

"Much like you would trade a stock, understand the story behind them and you'll probably better educated about investing in them," she advised.