BSP establishes guidelines on virtual asset service providers

By Edil Corneille

The Bangko Sentral ng Pilipinas (BSP), the central bank of the Republic of the Philippines, announced the approval by the Monetary Board (MB) on the guidelines on virtual asset service providers (VASP), or entities that facilitate financial services through the conduct of virtual asset (VA) activities, to cover new business models and activities. This is in line with the thrust of the Bangko Sentral to promote financial innovation while remaining sensitive to the attendant risks. The said guidelines amended the regulations on virtual currency exchanges (VCE) that were issued in 2017.

BSP Governor Benjamin E. Diokno said that “We have seen accelerated growth in the use VCEs in the past three (3) years and it is high time that we broaden the scope of existing regulations in recognition of the evolving nature of this financial innovation and set out commensurate risk management expectations.”

The MB-approved framework expanded the activities subject to the licensing regime of the Bangko Sentral from initially covering those involved in facilitating the exchange of fiat and VA. In particular, the following activities shall likewise be subject to the BSP’s licensing requirements, regulatory expectations for money service businesses (MSB), as well as anti-money laundering, countering the financing of terrorism and proliferation financing (AML/CFT/PF) obligations:

• exchange between one or more forms of VAs;
• transfer of VAs; and
• safekeeping and/or administration of VAs or instruments enabling control over VAs.

The VASP regulatory framework is said to be aligned with the financial technology (FinTech) industry’s best practices and is consistent with risk management standards set by international standard-setting bodies such as the Financial Action Task Force (FATF) on AML/CFT/PF.

“This will ensure that activities relating to VASP are executed within an unbroken chain of regulated entities,” Governor Diokno added.

The new framework also emphasises that all transactions involving the transfer of VA shall be treated as cross-border wire transfer and that VASPs are expected to comply with corresponding BSP rules governing wire transfer, particularly on the obligation to provide immediate and secure transmittal of originator and beneficiary information from one VASP to another for certain transactions.

Meanwhile, other existing rules and regulations for MSBs, such as those on outsourcing, liquidity risk management, operational risk management, information technology risk management, and financial consumer protection must be complied with upon securing the authority to perform VASP activities from BSP.