The movement of cryptocurrencies will now be subject to the central bank’s rules on financial service providers to guard against the potential use of so-called virtual assets in laundering money, according to the country’s top monetary regulator.
In a statement, the Bangko Sentral ng Pilipinas (BSP) said its policy-making Monetary Board recently approved the guidelines on virtual asset service providers—entities that facilitate financial services via blockchain, Bitcoin, crypto assets and digital currencies—to cover new business models and activities.
In particular, the exchange between one or more forms of virtual assets, their transfer and the safekeeping or administration of virtual assets or instruments enabling control over them will be subject to the BSP’s licensing requirements, regulatory expectations for money service businesses as well as antimoney-laundering, financing of terrorism and proliferation financing obligations.
“We have seen accelerated growth in the use of virtual currency exchanges 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,” BSP Gov. Benjamin Diokno said.
The central bank said the new rules were in line with the thrust of the regulator to promote financial innovation while remaining sensitive to the attendant risks. The guidelines amended the regulations on virtual currency exchanges that were issued in 2017.
The Monetary Board-approved framework expanded the activities subject to the licensing regime of the central bank from initially covering those involved in facilitating the exchange of fiat and virtual assets.
According to the regulator, the new virtual asset service provider regulatory framework was aligned with the fintech industry’s best practices and consistent with risk management standards set by international standard-setting bodies such as the Financial Action Task Force to combat the traffic of illicit funds.
“This will ensure that activities relating to virtual asset service providers are executed within an unbroken chain of regulated entities,” Diokno said.
The new framework also emphasizes that all transactions involving the transfer of virtual assets will be treated as cross-border wire transfers. Service providers will be 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 virtual asset service provider to another for certain transactions.
Meanwhile, other existing rules and regulations for money service businesses 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 virtual asset service provider activities from BSP.
The issuance of the new guidelines is in line with the regulator’s commitment to remain responsive to technological developments by espousing a balanced and coherent approach in supervising financial technology innovation, the central bank said. INQ