6 virtual asset providers apply for BSP licenses

The central bank is currently evaluating six applications to operate as virtual asset service providers (VASPs) to increase the number of VASPs before it closes the licensing window for three years.

Last Aug. 10, in a memo, the Bangko Sentral ng Pilipinas (BSP) announced that it is imposing a threeyear ban on VASP licensing beginning on Sept. 1, 2022.

However in a text message, BSP Deputy Governor Chuchi G. Fonacier said there are still six VASP applicants that have completed various stages of licensing procedures before the BSP will close the application window next month.

These non-bank applications will still be processed and assessed for completeness and sufficiency of documentation and information based BSP requirements. But, if any of these six applicants will be found to have incomplete requirements as of Aug. 31, the applications will be returned and considered closed. The BSP will no longer entertain nor accept new applications beginning Sept. 1, according to Fonacier in Memorandum Order M-2022-035. As of endJune, the BSP is supervising 19 VASPs.

The BSP’s Monetary Board explained the licensing ban as a modified approach which involved the closure of the regular application window for new VASP licenses for a period of three years and grant of new VASP licenses only to existing BSP supervised financial institutions (BSFIs).

BSP Governor Felipe M. Medalla said this modified approach to VASP licensing gives them more time to assess the existing VASPs' overall performance and risk management systems, as well as to monitor their impact on financial services and financial inclusion agenda, and their place in the BSP’s Digital Payments Transformation Roadmap.

Under the modified approach, the BSP said existing BSFIs with strong risk management systems may still apply for a VASP license.

Fonacier in the memo said existing BSFIs intending to offer VASP services including non-custodial VASPs for safekeeping and custodial services, can still apply for a license if they have a “stable” Supervisory Assessment Framework (SAFr) composite rating. “Due consideration will be given to the BSFI's risk management systems including its client suitability assessment and onboarding processes, as well as financial consumer education and awareness programs in the evaluation of its application,” she added.

The BSP refers to virtual currencies as virtual assets. It issued a circular to govern VASPs in 2017. The VASP regulation expands the BSP’s previous rules on virtual currency exchanges to include businesses that perform an exchange between one or more forms of virtual assets, the transfer of virutal assets and the safekeeping or administration of virtual assets.

The last time the BSP made any changes in their VASP rules was in early 2021 when it updated and revised its rules on the exchange of virtual assets by expanding the guidelines covering virtual currency exchanges and the registration and the granting of VASP license.

Last week, the BSP issued a strong public warning against unregistered and VASPs which are high risks and could lead to huge financial losses due to price swings.

The BSP also clarified that even registered VASPs in the Philippines would not be able to guarantee protection.