DLT and cryptocurrencies
FinTechs belonging to this category offer financial services using crypto currencies. This category also includes FinTechs utilising blockchain and distributed ledger technologies (DLT) upon which Bitcoin and Ethereum are based, among others. FinTechs develop and do research in this field in order to create new services – e.g. crypto currency exchange markets, wallet providers, NFTs-related services, new payment services, "smart contracts" or new clearing and settling services.
Attitude of the country towards financial services using crypto currencies
The BSP regulations on virtual asset service providers (VASPs) are fairly recent, and this is seen as the policymakers trying to catch up with VA systems that are delivering financial services in faster and more economical means. Acceptance and use of VASPs is on the rise in the Philippines, and there do not appear to be any significant reservations on the roll-out of such services here, provided of course, that licensing and related requirements are complied with.
Obligations and requirements to provide financial services using crypto currencies described above
Entities that intend to operate as VASPs in the Philippine should obtain a Certificate of Authority (COA) to operate as a VASP from the BSP. The application is a three-stage process, where (a) Stage 1 refers to the assessment of BSP of applicant’s eligibility to apply as a VASP; (b) Stage 2 refers to the issuance of the BSP’s letter of no objection for the applicant to register with the SEC; and (c) Stage 3 refers to the application for the COA.
VASPs with safekeeping and/or administration services for VAs are required to have a minimum paid-in capital of PhP50 million (approx. US$959,141) and should pay licensing fees of PhP100,000 (approx. US$1,918) to the BSP. If the VASP does not provide such services, the minimum paid-in capital is reduced to PhP10 million (approx. US$191,828) and the licensing fee is reduced to PhP20,000 (approx. US$384).
Persons or entities intending to provide services in the Philippines would generally be considered doing business in this jurisdiction and therefore, must also register and obtain a primary license from the SEC. This entails submission of documentary requirements with the SEC depending on the corporate vehicle (subsidiary or branch) intended to be established.
Additional comments regarding the legal situation for financial services using crypto currencies or what FinTech’s must be aware of in this business area
The BSP’s current VASP regulations do not cover businesses involved in the participation and provision of financial services related to an issuer’s offer and sale of VA (which fall within the jurisdiction of the SEC) and entities solely acting on their own behalf (i.e. not engaged in the business of actively facilitating VA-related activities for the account of others).
In addition, since the BSP has oversight over VASPs, the BSP may deploy enforcement actions and impose sanctions on the entity, its directors and/or officers for violations of BSP regulations.
Market size for financial services using crypto currencies and biggest companies in this business area
Based on publicly available information from the BSP as of 31 December 2021, there are 18 registered VASPs.
Additional comments regarding the economic situation for financial services using crypto currencies or what FinTech’s must be aware of in this business area