BSP warns public against unregistered, foreign virtual assets

Published August 17, 2022, 3:49 PM

by Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) has issued a strong public warning against unregistered and foreign virtual asset service providers (VASPs), which are high risks and could lead to huge financial losses due to price swings.

The BSP also clarified on Wednesday, Aug. 17, that even registered VASPs in the Philippines would not be able to guarantee protection since virtual assets (VA) are high risk activities because of virtual asset fluctuations.

Virtual currency/virtual assets (Manila Bulletin article)

Based on recent data cited by the central bank, it said frauds and scams have become more rampant leading to a “large portion of VA-based crimes” lately. “Thus, the public should exercise caution, conduct their own due diligence, and always be mindful of the risks prior to engaging with VA-related activities,” warned the BSP.

The BSP has been strongly urging the public not to deal with unregistered VASPs and VASPs domiciled abroad.

“On top of the inherent risk of price volatility associated with VAs, VASPs that are based abroad may present additional challenge on enforcing legal recourse and consumer protection and redress mechanisms for local customers, among others,” said the BSP.

The public is advised to verify whether a VASP they are dealing with is supervised and regulated the BSP. The list of BSP-registered VASPs are available in the BSP website. As of end-June, the BSP is supervising 19 VASPs.

To maintain the integrity and stability of the financial system and strengthen consumer confidence in the digital ecosystem, the BSP has temporarily closed for three years the regular application window for new VASP licenses.

BSP Governor Felipe M. Medalla has said that because of recent market developments, the BSP had to adopt a “modified” VASP licensing approach to better monitor VASPs’ overall performance and risk management systems, and their impact on financial services and financial inclusion agenda.

Under the modified approach, existing banks or non-banks with strong risk management systems including appropriate client suitability assessment and customer onboarding practices, and intensified financial consumer education and awareness programs may still apply for a VASP license.

The BSP refers to virtual currencies as VAs. 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 VAs and the safekeeping or administration of VAs.