CHAPTER I

THE PROBLEM AND REVIEW OF RELATED LITERATURE AND STUDIES

I. Introduction

Technology is changing the way business functions. It has

also shown its impact on the personal living of the people
globally. People are buying and selling the products using the
internet even when payment for the transaction is completed using
the internet. People have now reduced their visits to banks, and
lessen standing in a queue for deposits and withdrawals. One such
recent development found in the banking sector is cryptocurrency.

The growth of cryptocurrencies and Bitcoin for the past

years has attracted immense attention in the media and the users
alike. Cryptocurrency, as defined by the Homeland Security
Studies and Analysis Institute, is a form of currency that is
based solely on Mathematics which, unlike fiat currency that is
printed, is produced by resolving mathematical problems based on
cryptography. A digital asset; framed to work as a medium of
exchange. It uses decentralized control as opposed tocentralized
currency offered by Central Banks.

There are more than 1000 cryptocurrencies in the market but

Bitcoin is the most widely known and used cryptocurrency in the
world. Nakamoto (2008) introduced the world’s first decentralized
cryptocurrency, called bitcoin. Since 2008, Bitcoin is considered
to be the most controversial innovation in this field of
cryptocurrencies. Bitcoin works on a new payment technology,
wherein it allows payers and payees to directly transfer value to
each other electronically and anonymously without the need to use
the services of trusted third parties, like financial
institutions.
 In the case of the Philippines, the adoption rate of
cryptocurrencies was recorded only at 2.9% which is only second
to Singapore at 3.3%. While a majority of Filipinos had been
aware of cryptocurrencies, actual holdings remained low due to
perceived risks from these digital assets. An Organization for
Economic Cooperation and Development (OECD) report published this
month said that the level of awareness on cryptocurrencies in the
Philippines was 74% among respondents in a surveyconducted in
February and March, 2019.

According to Oxford Business Group-Financial Services

(2021), demand for Bitcoin has been surging globally since the
beginning of the coronavirus pandemic, with interest reaching a
fever pitch early this year. While it is not without its
potential pitfalls, emerging economies are increasingly looking
to cryptocurrencies as a way to drive their recoveries from the
economic fallout of the virus. As cryptocurrencies continue to
draw a lot of attention from investors, entrepreneurs, regulators
and the general public, much recent public discussions of
cryptocurrencies have been triggered by the substantial changes
in their prices, claims that the market for cryptocurrencies is a
bubble without any fundamental value, and also concerns about
evasion of regulatory and legal oversight. It will be helpful in
providing baseline information that determines the level of
success in the introduction of innovative exchange systems such
as the topic understudy. In addition, the results will also
reinforce valuable information to shed light on the possible
extent of adoption of cryptocurrency, based on identified
awareness in developing economies like the Philippines.

II. Review of Related Literature

Due to the extensive amount of information regarding

cryptocurrencies, only information pertinent to the research is
presented. Furthermore, information with similar ideas has been
grouped into sections for easier reading and comprehension.

Level of Awareness (Foreign Literature)

Cryptocurrency adoption is growing around the world. In the

article of Ballard (2019), it says that four out of five

Americans are familiar with at least one type of cryptocurrency.

Bitcoin is by far the most well-known, with three-quarters (75%)

of US adults saying they’ve heard of it. Most of the literature
available as well also refers solely to Bitcoin since it is the
first virtual currency to rely on cryptography as a means of
security while implementing a public distributed ledger to track
transactions (Frebowitz, 2018).

In the study of Patil (2019), it was mentioned that

millennial the term “millennial’s” became widely popular to
represent the Generation Y: Anyone born between 1980 to 1996
(ages 25-40) populace born between 1981(Downing, 2006).in

Dublin, Ireland have a high level of awareness in terms of

Bitcoin and formally accepted this as a mode of modern method of

currency. Despite being mistrusted by those who have not used it

before, most millennials trust it as a means of transfer and
payment. Patil even found out that males in their locale have
more knowledge and awareness compared to females. Overall, he
viewed millennials as “risk-takers” since they have a positive
outlook towards cryptocurrency as an investment opportunity.

On the other hand, Shukla (2019) investigated the awareness

and perception level of cryptocurrency in Bangalore. She believed
that cryptocurrency is created for the purpose of transaction as
a normal currency and investment opportunity. The Cryptocurrency
laden with so much new age technologies and a huge market
presence all over the world, but still, even after a decade of
its existence, it has not attained an established image as a new
age currency system among majority of the countries in the world
and people are still skeptical about its worth. In her findings,
she concluded that people in general are aware of the
Cryptocurrency and they would like to see it as part of their
investment portfolio as it provides good return. But they are
not willing to invest in Cryptocurrency due to lack of regulation
from Government and regulatory authorities. She also recommended
that if the Government of India and its regulatory authorities
will come forward to regulate its use and transaction in the
financial market, it can play a major role in the entire
investment portfolio.

Ku-Mahamud (2019) also claimed that cryptocurrency has great

potential to be used for transaction and investment in the
future. However, he considered the level of awareness still at an
infant stage, specifically in developing countries. For this
reason, Ku-Mahamud investigated the level of awareness towards
cryptocurrency in Malaysia. In his findings, it was found out
that cryptocurrency including blockchain technology has already
impact among individuals and organizations in the said locale. He
also found out that the level of awareness reached the
intermediate level with a small number of experts. The study also
exposed that many purchased more than one form of cryptocurrency
in which the main reason for their participation is due to
investment as they have trust in the long-term vision and value
of the tokens they have purchased.

Nature and Usage of Cryptocurrency

 In the study of Hassan (2018), it was found out that the
nature and usage of decentralized digital currency plays a vital
role in the awareness level about bitcoins as an investment
option. Hassan detailed these factors into four components namely
monetary factors, risk factors, operational factors and legal
aspects. Based on his findings, he labeled monetary factors as
the most important among these factors. He also explained that
risk factors affect the decision of investors. This includes risk
of fraud, threat of volatility, etc. On the other hand, he stated
that operational factors consist of variables like behavior of
investors related to online payments, usage of the internet,
qualification of individuals etc. Lastly, he described legal
aspects related to bitcoins in which it affects the decision of
an individual as legality of bitcoins, risks and vulnerability
associated with transactions of Bitcoins, personal information
associated with transaction. In his conclusion, he emphasized the
importance of these factors and how significant it is to the
level of awareness among the users. The nature and usage of
cryptocurrency were also used as factors in the study of Meero
(2021) in order to identify the level of awareness in GCC
countries. In his study, it was found out that these two factors
influenced the result. The analysis results show that the GCC
population has an average and moderate awareness towards
cryptocurrency. This average level of awareness is accompanied by
a slightly low level of trustiness on cryptocurrency and shows
doubt about its stability.

Alzarahni (2019) on the other hand investigated the current

cryptocurrency adoption level, adoption-influencing factors,
providing an in-depth analysis of these factors, and discussing
some pitfalls surrounding the cryptocurrency adoption. In his
study, he said that the cryptocurrency adoption level in Portland
is increasing and there are many factors influencing the
adoption. These factors include the nature and usage of
cryptocurrency. He further revealed that many people treat
cryptocurrency as an investment vehicle rather than a currency,
while others adopt it for its innovative technical. He mentioned
that cryptocurrency allows users to send or receive whatever
amount of money anywhere in the world with a low transaction cost
at faster speed in comparison to the traditional financial
systems. Describing its nature, Alzarahmi stated that having a
currency that is not tied or backed by a government forms a very
significant adoption criterion.

In South Africa, Walton (2018) explored the factors

(enablers and barriers) that affect Bitcoin adoption. In his
findings, the results indicate that perceived benefit (the nature
of Bitcoin), attitude towards Bitcoin, subjective norm, and
perceived behavioral control (the usage of Bitcoin) directly
affected the participants’ intentions to use Bitcoin. Further, it
emerges that the barriers to Bitcoin adoption in South Africa
consist of the complex nature of Bitcoin and its high degree of
volatility. Walton also recommended that factors affecting
adoption and the barriers to adoption should be taken into
consideration.

In the study of Eigbe (2019), she examined the levels of

awareness and adoption of digital currency in Nigeria. Unlike
from other literature, the study reported that the level of
awareness of Bitcoin is low, thus resulting in a low level of
adoption. Also, the majority of those who claimed to be aware
lacked proper understanding of the functionalities of Bitcoin.
Thus, this led to a conclusion that nature and its usage must be
looked upon as factors that will affect the level of awareness
among its users. The need for extensive awareness and exhaustive
training to potential users, as well as stipulated regulations to
ensure safe transactions, were recommended by the study.

Level of Awareness (Local Literature)

In the article released by Philippine Daily Inquirer last

2019, it was stated that despite the majority of Filipinos
indicating awareness about cryptocurrencies, their actual
holdings remained low due to perceived risks related to these
digital assets. According to an Organization for Economic
Cooperation and Development (OECD) report, the level of awareness
of cryptocurrencies in the Philippines was 74 percent among
respondents to a survey conducted in February and March 2019. The
survey also revealed that the level of awareness, however, ranged
from “not very well” (27 percent of respondents) and “to some
extent” (20 percent) to “very well” (17 percent). It was also
found out that the topmost reasons why Filipinos held
cryptocurrencies are curiosity to know more about digital assets,
mode of payment for online purchases, and for investment (de
Vera, 2019).

In the latest survey administered by TripleA (2021) on

cryptocurrency information about the Philippines, it was
estimated that over 4.3 million people or 4.0% of Philippines’
total population currently own cryptocurrency. As of 2021, it was
reported that the Philippines now is one of the world’s fastest
adopters of cryptocurrency. The study exposed that the
Philippines has the third-highest uptake of crypto globally. It
was also found out that there is a high level of awareness of
crypto in the Philippines by 74%. In their statement, 53% of
Filipinos expressed interest in investing in cryptocurrencies in
the future while 39% of Filipino crypto owners said that they
would use these assets as a means of payment for online
purchases. Various surveys also agreed that the Philippines is
one of the world’s fastest adopters of cryptocurrency. England
(2021) said that the pandemic has fueled the trend, with
Filipinos releasing the value of crypto as an investment and
income generating currency.

Doblas (2019) stated that this success of cryptocurrency

will largely depend on the extent to which society is willing to
adopt it. For this reason, he investigated the level of awareness
and attitude of college students in Cagayan de Oro, Philippines
towards cryptocurrency and how these may result in an eventual
decision to adopt. According to him, this will be helpful in
providing baseline information on the possible factors that
determine the level of success in the introduction of innovative
exchange systems such as the topic understudy. In addition, the
results also reinforce valuable information to shed light on the
possible extent of adoption of crypto currency, based on
identified awareness and attitude, in developing economies like
the Philippines. In his findings, he said that the number of
consumers who are highly aware of the presence of cryptocurrency
is still much to be desired. Cryptocurrency is positively viewed
as a potential medium of exchange but there is still much
skepticism for it to be positively accepted to function as an
investment vehicle primarily due to its volatility. He also added
that attitude towards cryptocurrency and level of awareness
significantly influence an individual’s willingness to adopt
cryptocurrency.