Philippines Reserve Bank Updates Regulatory Framework for Virtual Currency Exchanges as Crypto Industry Continues to Expand

The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) has reportedly reviewed and approved the applicable guidelines for virtual asset service providers (VASP) and other entities that facilitate financial services by using VASPs (also referred to as cryptocurrencies).

The new guidelines have updated the existing regulations (in the Philippines) on local virtual currency exchanges (VCEs) that were introduced back in 2017.

The board-approved regulatory framework for crypto-assets has expanded the activities that are now subject to the licensing requirements of the BSP (the nation’s central bank) from initially covering the parties involved in carrying out the exchange of fiat and digital assets.

The exchange between one or more forms of virtual assets (VAs), transfer of VAs and safekeeping and/or administration of VAs or instruments enabling control over VAs will now be subject to the BSP’s licensing guidelines and requirements. These digital currency transactions will also have to adhere to the regulatory expectations for money service businesses (MSB), applicable anti-money laundering (AML) rules, countering the financing of terrorism and proliferation financing (AML/CFT/PF) requirements.

The VASP regulatory framework in the Philippines is consistent with the country’s Fintech industry’s best practices and it’s also aligned with various risk management guidelines established by global standard-setting organizations like the Financial Action Task Force (FATF) on AML/CFT/PF.

The updated regulatory framework states that all transfers involving crypto-assets will be  treated as cross-border or international wire transfers and that VASPs must adhere to the applicable BSP rules governing these types of transactions (particularly the obligation to offer immediate and secure transmittal of originator and beneficiary details between VASPs for certain transactions).

Other applicable guidelines and regulations for MSBs, like those on outsourcing, liquidity risk management, operational risk management, information technology risk management, and financial consumer protection must be followed after being given the permission to conduct VASP-related transactions by the BSP.

Benjamin E. Diokno, Governor of Bangko Sentral ng Pilipinas BSP, stated:

“[These new and updated cryptocurrency regulations] will ensure that activities relating to VASPs are executed within an unbroken chain of regulated entities. We have seen accelerated growth in the use of VCEs in the past three 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.”

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