The world’s largest cryptocurrency exchange operates in a regulatory world of its own that does not always correspond with the one that exists in the many jurisdictions in which it does business. In late Nov. 2023, the Philippine security regulator warned the company that it is not authorized to operate in the country without a license and sell or offer securities to the public, and would not be able to continue in that manner. In a statement, the SEC said that it was “warning the public against using online cryptocurrency exchange Binance, as it moves to have the platform blocked in the Philippines to safeguard the public from unregistered investment products.”
Binance has a well-deserved reputation as a disruptor with little regard for regulatory norms that complicate its business operations. It is not a surprise that the massive crypto exchange has fallen afoul of yet another financial regulator. Before this action by the Philippines, Binance had already been banned in 17 other countries.
However, it would be a mistake to see this action by the Philippines SEC as indicative of a broader hostility towards digital assets. We see no evidence of such a stance among the country’s financial regulators. On the contrary, they seem to see a role for cryptocurrencies in boosting financial inclusion – an ongoing initiative in a country where there are still an estimated 40% of adults without bank accounts – and have not moved to restrict the operations of local, licensed cryptocurrency exchanges.
Unlike many other countries, where Web3 investments have yet to bear fruit, the Philippines is estimated to be home to 30% of the world’s crypto gamers, according to Marketplace. Reporter Eli Tan describes the country as “really the haven for this stuff” and says that crypto gaming has “become the livelihoods of a lot of people” in the Philippines.
Data compiled by research firm Chainalysis show that in November and December, the value of crypto transactions in the Philippines increased 70% from September and October to US$7.3 billion.
Meanwhile, once it became clear that Binance really would be banned in the Philippines, some panicked investors apparently rushed to liquidate their holdings at significant discounts. We find that unfortunate, but it is not as if they did not have adequate time to prepare for this moment. Licensed local exchanges will likely be the beneficiaries of the Binance ban, as some investors transfer over their holdings. With that in mind, Rafael Padilla, legal director at Farcove Consulting in Manila, said in a March 28 DL news article that blocking Binance’s website while letting local crypto exchanges offer similar products is “invidious discrimination.”