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THE CENTRAL BANK has modified its regulations to cover more types of virtual asset service providers (VASPs) and better protect itself against risks amid increased use of these services.
“This is in line with the Bangko Sentral’s drive to promote financial innovation while remaining sensitive to associated risks. These guidelines modified the regulations on virtual currency exchanges (VCE) that were issued in 2017, ”the central bank said in a statement on Tuesday.
“We have seen accelerated growth in the use of virtual currency exchanges in the last three years and it is about time that we broaden the scope of existing regulations in recognition of the changing nature of this. to befinancial innovation and setting risk management expectations accordingly, ”Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said in the statement.
The BSP’s expanded guidelines for VASPs use the Financial Action Task Force (FATF) definition of the types of these providers.
Under the revised framework approved by the Monetary Board, the VASP activities covered by the central bank will now include the exchange between one or more forms of virtual assets, the transfer of virtual assets, and the custody and / or management of virtual assets or instruments that allow the control of virtual assets.
These will be subject to the licensing requirements of the BSP, the regulatory expectations for money services companies and the fight against money laundering, countering terrorist financing and proliferation financing obligations.
The initial framework launched in 2017 only covered providers that facilitate the exchange of virtual and fiduciary assets.
However, the BSP did not include VASPs that participated in an issuer orffer or sale of virtual assets within its framework, which were also included in the FATF definition. This is because these activities are under the jurisdiction of the Securities and Exchange Commission, said Lyn I. Javier, BSP’s Managing Director of Policy and Specialized Supervision, in a text message.
“The BSP will continue to look for existing players that would potentially be covered by the expansion of the regulatory scope,” Javier said.
Under the new guidelines, all transactions involving the transfer of virtual assets will be treated as cross-border bank transfers.
This means that virtual asset transaction service providers will now need to comply with regulations on wire transfers, such as providing immediate and secure transmission of originator and payee information from one service provider to another for certain transactions.
Once authorized by the BSP to conduct VASP activities, these service providers will also need to comply with other existing rules for money service businesses such as those regarding outsourcing, liquidity risk management, operational risk management. , information technology risk management and financial consumer protection,
The BSP said that the VASP regulatory framework is aligned with to bethe best practices of the technology industry and is consistent with international risk management standards, such as those of the FATF.
“This will ensure that activities related to virtual asset service providers are carried out within an unbroken chain of regulated entities,” Diokno said.
The central bank’s new guidelines for VASPs are a “welcome” and encouraging development for fintech players, an industry group said, noting that the regulator is likely “looking to plug regulatory holes” that may not be there. under the supervision of the Securities and Exchange Commission.
“It seems to me that BSP wants the market to take advantage of the benefits of blockchain technology to reduce costs and introduce competition in the consumer finance industry,” said Fintech Alliance.ph Chariman Angelito “Lito” M. Villanueva in a message from Viber.
However, Villanueva said that decentralized to beFinancing can challenge the central bank’s ability to regulate.
“I think regulating decentralized finance means the ability to properly audit and enforce rules on code writers (for smart contracts). Either the private sector provides these services or the government has to be in a position to do its own audit, ”he said.
He added that the central bank also needs to look for other terminologies that can be used for VASP, as the same acronym is used for value-added service providers regulated by the National Telecommunications Commission.
There were 17 money service companies with virtual currency exchange services licensed by the BSP in November, data on its website showed. – LWT Noble
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