Financial regulators led by the Bangko Sentral ng Pilipinas (BSP) will probe gaming applications such as Axie Infinity and other social media platforms for its use of financial technology firms or fintechs to harmonize its different regulatory responses.
“Social media platform owners and gaming application providers may be required to obtain the necessary authority to conduct fintech-related services that cut across the different jurisdictions of member agencies of the Financial Sector Forum (FSF),” said the BSP in an email to Business Bulletin.
The FSF is a voluntary inter-regulator coordination body comprised of the BSP, the Securities and Exchange Commission (SEC), the Philippine Deposit Insurance Corp. and the Insurance Commission. It could collaborate and clarify the cross-cutting nature of fintech activities and which regulator would best fit a specific fintech-related services applied by gaming apps or social media units.
FSF member-agencies has a memorandum of agreement (MOA) for a Cooperative Oversight Framework on fintech innovation to enhance the enabling regulatory environment for the digital financial economy. Basically, the framework allows BSP et al to regulate any activities that use a single application platform for a “seamless” regulation and supervision of fintechs.
Fintechs are technology-based companies that deliver financial services. In regulating fintech activities – such as those used by gaming apps for money and social media platforms – the risks attendant to fintech use will be “effectively managed without stifling innovation,” said the BSP.
The existing MOA, signed in February this year, will also avoid regulatory overlaps and ensure cybersecurity rules, as well as anti-money laundering/combatting of financing of terrorism (AML/CFT) rules are being followed and complied with.
“The agreements under the framework are expected to eliminate regulatory arbitrage and promote adherence to standards on cybersecurity, AML/CFT, and consumer protection,” said the BSP.
The BSP said it has developed policies commensurate to the management of risks related to technological developments consistent with its balanced and risk-based approach in supervising financial innovation.
In the Philippines, about 75-80 percent of fintech players provide payments and alternative financing, and use blockchain and digital currencies.
At the moment, the BSP is not considering play-to-earn gaming apps such as Axie Infinity as a virtual asset service provider (VASP) yet but it is looking into its possible classification as an operator of payment system (OPS).
The BSP is reviewing the cryptocurrency assets known as Smooth Love Potion (SLP) as a form of payment to buy goods and services and if these activities fall under OPS activities. SLP tokens are priced at $0.14 (US dollar) or almost P7.
The BSP’s jurisdiction over cryptocurrency-related activities cover VASPs. While the BSP does not yet see Axie Infinity as a VASP, it said it is “actively monitoring the level of merchant acceptance of SLP as a form of payment for goods/services, which may fall within the activities of an OPS.”
The BSP’s regulatory framework for VASPs allow end-users to exchange fiat or physical money to crypto assets to acquire non fungible tokes or NFTs for game applications and to convert the same back into fiat currency.
If Axie Infinity is an OPS, it will be required to register with the BSP.
An OPS may be cash-in service providers, bills payment service providers, and entities such as payment gateways, platform providers, payment facilitators and merchant acquirers that enable sellers of goods and services to accept payments, in cash or digital form.