BSP warns against NFTs anew after $600-million crypto heist

The Bangko Sentral ng Pilipinas (BSP) has again flagged the risks of non-fungible tokens (NFTs), following the theft of $600 million worth of digital tokens from a digital ledger used by players of the popular online game Axie Infinity.

BSP Payment System Oversight Department Deputy Director Bridget Rose Mesina-Romero called on the public to exercise caution over play-to-earn games, citing the risks that come with such instruments.

“We have been reminding the public that they should be aware of how these games work, the risks attended to them, and they should for example know how they can have recourse or remedies,” she said in a virtual briefing on Thursday.

“They should only place funds that they are willing to lose because of the risks,” she continued.

This comes after the Ronin Network— used by Axie Infinity as its digital ledger—said hackers amassed 173,600 Ether and $25.5-million worth of the USD Coins, equivalent to $615 million as of Tuesday but worth $540 million at the time of the attack.

Axie Infinity maker Sky Mavis said they were made aware of the security breach on Tuesday, after Ronin said hackers gained access to private keys to withdraw digital funds.

About 35% of traffic in Axie Infinity comes from the Philippines, accounting for the biggest share of its 2.5 million daily active users.

The BSP earlier said it is monitoring transactions involving Axie Infinity’s small love potions (SLPs), which users can either cash out or use to breed new Axies or digital pets.

The central bank has earlier noted that SLPs are excluded from its scope under the guidelines for Virtual Asset Service Providers, as its regulatory focus is on the exchange of fiat money for virtual assets.

Sky Mavis is not registered as an operator of payment systems (OPS), and the BSP said it is in coordination with other regulators to determine whether the firm should fall under such a category.

“Since this is a digital field, it creates a borderless area where fraudsters can really enter and perform illicit activities, so the public should practice cyber hygiene in order to protect your personal data and identity,” Romero said.

In the same briefing, BSP Governor Benjamin Diokno reiterated the volatility that comes with digital tokens.

“We wish to emphasize that there are risks associated with NFTs such as price volatility which may result to significant financial losses, and also other types of risks relating to cyber fraud and scams,” he said.

“As such, we would like to remind the public to transact only with BSP-registered entities,” he added. — BM, GMA News