In the digital world we find ourselves in, sovereign governments can only govern with the acquiescence of the tech giants.
It has been a few months since our Securities and Exchange Commission (SEC) and the National Telecommunications Commission (NTC) banned the cryptocurrency trading platform Binance. The move was intended to protect Filipino investors. It is also intended to help the country move out of the grey list of the Financial Action Task Force (FATF).
Binance has gained worldwide notoriety. In the US, Binance founder Changpeng Zhao was found guilty and fined $4.4 billion. In addition to the jail term for fraud.
The SEC decision to ban Binance is part of government’s efforts against unlicensed cryptocurrency players. We languish in the FATF grey list because of the perception we have a weak regulatory infrastructure. The ban tries to demonstrate we are improving on our regulatory capacity.
The ban notwithstanding, the Binance mobile app continues to be available for Filipinos to download from Google Play Store and Apple’s App Store. With this mobile app, people could still transact with a cryptocurrency platform that had, in fact, pleaded guilty to charges leveled against it in an American court.
Google and Apple are giants in their respective domains.They wield considerable power over markets everywhere. The best our regulators can do to enforce the ban is to file a “formal request” for the Binance app to be removed from the two app stores. After doing so, according the the SEC chairman himself, the matter was “up to them.”
It appears we can only sit and wait for Google and Apple to take notice of our “formal request.” The Philippine state may enjoy untrammeled sovereignty over our land and waters. But it has little power in the digital sphere. In this modern world, the digital sphere matters much.
Binance is not the only digital investment platform the SEC has banned in its mission to protect small Filipino investors from fraud.
The SEC also banned OctaFX for doing business in the Philippines without the required license or permit. This trading platform was selling unregistered shares. That leaves investors unprotected.
Another company, MiTrade, offers multiple financial instruments across various asset classes without a license or registration with Philippine authorities. This company, too, has been banned by both the SEC and the NTC.
As in the case of Binance, OctaFX and MiTrade apps continue to be available on the Google Play and Apple App Store to this day.
Other regulators elsewhere seem to be more effective in getting the tech giants to enforce bans. The most notable among these is India’s Ministry of Electronics and Information Technology.
The Ministry directed both Apple and Google to remove several trading apps. This was after India’s anti-money laundering body Financial Intelligence Unit (FIU) flagged at least nine platforms last December. Both Google and Apple promptly removed most of the trading apps identified by the Indian government.
The difference in the responses of the tech giants to our request and that of India could be because of the subcontinent’s sheer size and market heft. But that should not be the decisive factor. Money laundering, in whatever magnitude, punctures the protective bubble the FATF is trying to build.
Money laundering will continue to happen despite the vigilance of individual governments if that vigilance fails to win the cooperation of the tech giants.
Several countries, including the US, India, the EU, South Korea and Nigeria have moved to impose discipline not only on the noncompliant cryptocurrency companies but also on both Google and Apple. Our regulatory authorities must try and replicate the actions of the jurisdictions mentioned above. If Google and Apple refuse to cooperate without bans, we should be able to enforce penalties against them for abetting fraud.
Google’s failure to remove the banned apps from their store is strange. In 2022, Google announced a revision in its policy. Henceforth, they claimed, all cryptocurrency exchanges and electronic wallets must first secure proper licenses even before advertising in the Philippines.
Two years after that announcement, unlicensed players continue to advertise themselves in Google Play Store. They do so with impunity even as Google announces otherwise. Through all that, Google imperiously ignores Philippine government requests to take banned apps off its platform.
The digital revolution continues apace. In a while, artificial intelligence will overwhelm the digital space with its awesome (and cascading) power. If machines could do the trading themselves, the world will indeed seem ungovernable.
The challenge for all governments is to rapidly upgrade regulatory capacity to keep pace with new digital technologies and the tradable investment products they bring. This is particularly urgent for finance technology (fintech), which is at the cutting edge of the digital revolution.
Cross-border regulatory networks must keep pace as well. The FATF should be specifically challenged. As currency moves electronically and in different digital forms, fighting money laundering seems an uphill battle.
Perhaps, beyond pointing out what our regulatory institutions fail to do, the FATF might play a more proactive role helping smaller nations win the cooperation of the tech giants. Crimes are increasingly happening in cyberspace. Law enforcement must be able to win the battle in the same space.
I am not sure if the SEC and the NTC have the technical capacity to take off banned apps from the Google or Apple platform. From all that could be seen, both agencies seem dependent on the graciousness of the tech giants.