The Bangko Sentral ng Pilipinas (BSP) has cancelled the registration of two virtual assets service providers (VASPs) as per the rules stated in a circular on VASP guidelines.

In separate circular letters, BSP Deputy Governor Chuchi G. Fonacier said the Monetary Board, BSP’s policy-making body, has approved the cancellation of the certificates of registration of Coinville Phils Inc. and Bexpress Inc.

The two VASPs operate as remittance and transfer companies with a type “A” remittance agent with a virtual exchange service or VASP.

Fonacier did not disclose the specifics that led to the cancellation of registrations with the BSP, but stated that the two separate Monetary Board resolutions approved the cancellation.

The BSP defines virtual assets or VA as any type of digital unit that can be digitally traded, or transferred, and can be used for payment or investment purposes.

It is used as a medium of exchange or a form of digitally stored value created by agreement within the community of VA users. However VAs “are not issued nor guaranteed by any jurisdiction and do not have Iegal tender status.”

Meanwhile, VASPs are entities that offer services or engage in activities that provide facility for the transfer or exchange of VAs, which involve the conduct of one or more of the following activities: exchange between VAs and fiat currencies; exchange between one or more forms of VAs; transfer of VAs; and safekeeping and/or administration of VAs or instruments enabling control over VAs.

The BSP always issue public warnings against transacting with VASPs that are unregistered and domiciled abroad or unknown foreign VA companies.

As of end-August this year, there were 19 non-bank VASPs registered with the BSP and this number still includes Coinville and Bexpress. Of the 19, seven were inactive including Coinville.

The BSP has been reminding the public that the BSP will not be able to enforce legal recourse or protect consumers such as redress mechanisms for VASPs based abroad.

Dealing in VAs, said the BSP, are generally considered as high risk activities “which may result in huge financial losses due to price swings.”

The BSP highly encourage financial consumers to verify with the BSP if the VA firm or companies they are dealing with is supervised and regulated.

Based on a Dec. 7, 2022 memo, the central bank has instructed all registered VASPs not to engage in any business activities other than for the safekeeping of assets.

The BSP imposed a three-year ban on VASP licensing beginning on Sept. 1, 2022. The BSP refers to virtual currencies as VAs.

The central bank first 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 virtual assets and its safekeeping or adminstration.

Fonacier has said that there were persistent threats in the VA world that affect practices and endanger the safety and security of customer funds.

She said previously that all VASPs, particularly those providing safekeeping and administration services for VAs such as custodians, should ensure that customers’ VAs are not being used for any business activities other than for safekeeping on the customers’ behalf.

Since VASPs facilitate the conversion or exchange of fiat currency to VAs or vice versa, the BSP also reminded all VASPs to be especially critical in assessing the risk profile of liquidity providers.

VA users have been advised to always check for the following: license and registration status of the VA issuers; the legal and supervisory framework of the jurisdiction from which the liquidity providers are domiciled; and supervisory/enforcement capabilities of relevant regulatory bodies/enforcement agencies.