Philippines central bank proposes 12-month freeze on new payment operators and tighter crypto rules

The Bangko Sentral ng Pilipinas has proposed a draft circular to freeze new registrations for Operators of Payment Systems for 12 months. This suspension aims to allow the central bank to review its licensing framework and taxonomy. Alongside the freeze, the regulator is introducing tighter controls on Virtual Asset Service Providers, requiring direct merchant arrangements, enhanced due diligence, and transaction limits to mitigate fraud and money laundering risks.

BSP payment operator registration freeze

• ▪Under the proposed 12-month suspension, the Bangko Sentral ng Pilipinas would continue evaluating already-submitted applications but would not issue approvals or denials until the pause ends
• ▪The Bangko Sentral ng Pilipinas proposed a draft circular to suspend the acceptance and processing of new registrations for Operators of Payment Systems for 12 months
• ▪The proposed 12-month suspension on new Operators of Payment Systems registrations would take effect 15 days after the draft circular is officially published

Tightened VASP merchant acquisition rules

• ▪The Bangko Sentral ng Pilipinas proposed that supervised institutions offering merchant acquisition services must handle regulated Virtual Asset Service Providers through direct merchant arrangements rather than intermediaries
• ▪The Bangko Sentral ng Pilipinas proposed establishing a centralized database to improve the traceability of merchant payments and banning intermediary structures in certain transaction flows
• ▪The proposed rules require merchant acquirers to apply enhanced due diligence, monitoring, transaction and settlement limits, and other risk-based controls to Virtual Asset Service Providers
• ▪The proposed merchant acquisition rules would apply to Virtual Asset Service Providers that are licensed, registered, or authorized by the Bangko Sentral ng Pilipinas, the Philippine Securities and Exchange Commission, or other relevant authorities

BSP regulatory review rationale

• ▪The Bangko Sentral ng Pilipinas proposed the 12-month suspension to conduct a holistic review of its classification taxonomy and licensing framework for payment operators
• ▪The Bangko Sentral ng Pilipinas stated that its motivation for the proposed regulatory changes centers on improving risk management, enhancing consumer safeguards, and addressing concerns about fraud and money laundering

Philippine crypto regulatory context

• ▪The draft circular by the Bangko Sentral ng Pilipinas groups Virtual Asset Service Providers alongside gambling businesses, gaming providers, adult-oriented businesses, and money service businesses
• ▪The Bangko Sentral ng Pilipinas previously imposed a moratorium on new Virtual Asset Service Provider licenses in September 2022, which has been extended indefinitely with the current expiration set for September 2025

Debatable claims

• ▪The Philippines should establish a centralized database to track merchant payments
• ▪The Philippines should freeze new payment operator registrations for 12 months
• ▪Regulators should not classify cryptocurrency firms alongside gambling and adult-oriented businesses

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