How Emerging Markets Benefit From Local Currency Stablecoins: Insights from the Philippines
January 30 2025
by Markus Franke
Authors: Luis Buenaventura, Author, Artist and Head of Cryptocurrencies at GCash and Dr. Markus Franke, CEO at Mento Labs
Stablecoins have become essential tools in the cryptocurrency world, acting as gateways into the Web3 space and Decentralized Finance (DeFI) solutions. Yet their use in everyday financial activities, such as payments and remittances, still remains a barrier in many emerging markets. There are several hurdles slowing down the widespread adoption. A lack of robust financial and technological infrastructure continues to impede the scalability of stablecoins. The institutional trust is often low, and awareness of stablecoins’ potential is limited. However, local currency stablecoins that are developed to integrate into specific economies, might drive the next wave of adoption. Their unique design as a familiar and trusted currency can resonate with local populations.
The Philippines, one of the regional leaders in crypto adoption, exemplifies how local currency stablecoins like PUSO, a token that tracks the Philippine Peso, could support financial inclusion across the country, reduce remittance costs, and provide stability for millions of users.
The Crypto Landscape in the Philippines
The Philippine crypto ecosystem has grown in spikes over the last 11 years, much like the global crypto market itself. It stands out as a high-growth market for cryptocurrency adoption, ranking eighth globally. This growth is driven by several factors such as strong reliance on remittances, increasing mobile payment usage, and government-backed regulatory frameworks. Their primary financial regulator, the Bangko Sentral ng Pilipinas (BSP), has recognized cryptocurrencies as a valid payment method and issued comprehensive guidelines for Virtual Asset Service Providers (VASPs). This includes stringent anti-money laundering (AML) and counter-terrorism financing (CTF) measures. The Philippine government has also embraced blockchain technology in various sectors. A landmark example is the issuance of tokenized treasury bonds in 2023.
Crypto adoption in the Philippines tends to occur in waves, often driven by necessity. The local crypto community expands and contracts depending on the stage of the adoption cycle. The most significant spikes have been observed during periods of heightened need such as during the peak of the pandemic. At that time, 1.5 million Filipinos turned to play-to-earn activities with Axie Infinity, the pioneering Web3 game.
There are an estimated 4-5 million crypto users in the Philippines out of a population of over 110 million. The numbers may appear small, but these figures reflect a disproportionate representation of lower-income users, given that 92% of Filipinos live on minimum wage or less. This unique demographic makes the Philippines an important testing ground for crypto solutions targeting emerging markets.
Challenges in Traditional Finance
The limitations of the Philippines’ traditional financial systems highlight the potential for stablecoins to address systemic inefficiencies: Remittances account for nearly 10% of the Philippines’ GDP, with overseas Filipino workers (OFWs) sending over $30 billion to their families annually. Yet, fees for sending money through traditional channels like Western Union or MoneyGram can range from 5% to 25%, representing a heavy financial burden for low-income households. Delays in international and interbank transfers disrupt daily financial planning for families dependent on remittances. Settlement can take several days, leaving households vulnerable to financial uncertainty. A significant portion of the population remains unbanked or underbanked, unable to access formal credit or savings mechanisms. This financial exclusion perpetuates cycles of poverty and limits economic mobility. These challenges create a need for financial alternatives that are affordable, efficient, and accessible – criteria that local stablecoins are well-positioned to meet.
The Role of Local Currency Stablecoins
Unlike global stablecoins pegged to currencies such as the US Dollar, local currency stablecoins like PUSO are designed to integrate into specific national economies. By tracking the price of the Philippine Peso, PUSO addresses the specific challenges of the local market. The launch of the PUSO was made possible through Mento, an open-source stablecoin platform, designed to enable the creation and operation of decentralized stablecoins globally.
Mento has previously supported the launch of stablecoins pegged to currencies such as the Kenyan Shilling (cKES) and the Ghanaian Cedi (cGHS), addressing unique regional needs in Africa, from micro-lending through local lending circles called “Chamas” to payments solutions integrated with local payment railways like M-Pesa. These local currency stablecoins have supported a range of applications in remittances, microloans, and payments, with the Mento Asset Exchange for users to ensure currency swaps and liquidity. In the Philippines, Mento has enabled the development of PUSO as a Peso-tracking stablecoin backed by a diversified portfolio of assets in the Mento Reserve to support its stability and transparency. Launched by Celo Philippines DAO on the Mento Platform, PUSO introduces several key potential benefits to the Philippine financial ecosystem.
PUSO can significantly reduce transaction fees for remittances, payments, and loans, allowing more money to stay within Filipino households.
Blockchain-based stablecoins enable instant transactions, bypassing the delays associated with traditional financial systems.
PUSO can be integrated into existing mobile wallets like GCash and Valora, providing a familiar interface for users and extending access to unbanked populations.
For businesses and individuals, borrowing in foreign currencies like USD can expose them to currency volatility. PUSO offers an alternative by enabling Peso-denominated loans, protecting borrowers from exchange rate risks.
Remittances and the Untapped Potential
In countries like the Philippines, stablecoins are currently widely used at the industry level as a settlement tool between offshore remitters and their local distribution partners. This segment of the market is highly price-sensitive, frequently switching between stablecoins and traditional banking channels based on which option offers better efficiency at a given time. Traditional financial institutions, for the most part, still steer clear of direct interactions with stablecoins. They rely on crypto specialist partners to handle the conversion of funds into local currency before they reach institutions. While a few have ventured into incorporating cryptocurrencies into their treasuries, institutional-level hesitation remains a significant barrier, preventing this from becoming a widespread practice. Building trust is key for traditional finance to fully embrace and benefit from stablecoins.
Looking ahead, crypto can be transformative for the Philippines as more users come to understand that stablecoins enable them to remit funds without relying on intermediaries. However, achieving this will require significant user education and awareness. The adoption hurdle would be much easier to overcome if the stablecoins in question were locally recognized and trusted, like PUSO. The long-term impact of local currency stablecoins will depend on sustained community engagement, regulatory clarity, and the continued development of user-friendly infrastructure. As local currency stablecoins like PUSO that are familiar to the Filipino population gain traction with the efforts of the grassroots community, it will demonstrate the potential of stablecoins to drive efficiency and accessibility in the emerging markets. The Philippine market is a great example to show the need for solutions tailored to reflect local economic conditions.
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