Philippines Pauses Licensing VASP

Although crypto is extremely popular in the Philippines, the central bank, Bangko Sentral ng Pilipinas (BSP), announced that they won’t accept any new virtual asset service provider (VASP) applications for three years “subject to reassessment based on market developments”.

The BSP lists 19 companies that are licensed to offer services related to virtual assets. It seems that there’ll be no more additions any time soon.

💡 Interesting fact: one of the 19 licensed companies (COINS.PH) is owned by a former Binance CFO Wei Zhou, who left Binance 3 years ago.

According to the statement made on Aug 11, the central bank is trying to find a balance between innovations and high risks and that’s why the regular application window for new VASP licenses will be closed for three years, starting September 2022.

“…The Bangko Sentral recognizes that as VAs offer opportunities to promote greater access to financial services at reduced costs, they also pose varied risks that may undermine financial stability.”

At the same time, existing financial institutions supervised by BSP who wish to expand their range of operations by offering VASP services may still apply for a license provided that they have a stable rating.

BSP issued a public warning regarding unregistered and foreign crypto service providers:

The Bangko Sentral ng Pilipinas (Bangko Sentral) strongly urges the public not to deal with virtual asset service providers (VASPs) that are either unregistered or domiciled abroad.

The statement mentions risks from price volatility associated with virtual assets and explains that VASPs that are based abroad “may present additional challenges on enforcing legal recourse and consumer protection and redress mechanisms for local customers, among others.”

It is worth noting that cryptocurrencies are extremely popular in the Philippines. A recent survey revealed that The Philippines ranks 10th in cryptocurrency adoption, with 9.4 million Filipinos owning crypto.

Perhaps the development of the crypto industry seemed too fast for the government and they have decided to slow it down by temporarily ceasing the entrance of new players into the country’s market. It appears that BSP wants to keep the financial system stable and healthy, that’s why they don’t want to let unregulated strangers and newcomers inside the country’s economy, especially now as many crypto companies are going bankrupt etc. All in all, if these 19 companies can meet the demand, why would the government take any further risks? Competition among companies is good for development but too many players in such a risky sector can bring a lot of harm too.

The Philippines authorities have started to show their teeth even before this statement came out. Earlier this year Binance was extremely optimistic concerning its future in the country and now it is being accused of operating in the country without authorisation… As soon as Binance announced its plans to get licensed, Infrawatch PH, a public policy think tank in the Philippines, asked BSP to suspend and ban Binance in the country.

Later SEC of Philippines sent a letter advising the public not to invest in Binance.

“… Binance is not a registered corporation or partnership. Consequently, Binance does not possess the necessary authority and or license to solicit investments as only registered corporations can apply for and be issued the necessary licenses to solicit investments”.

On one hand, such a strict policy seems to be a bit excessive for a country where crypto is so popular (especially when it comes to such well-established companies as Binance). On the other hand, the authorities are just adhering to the rules and criteria created to keep the economy safe — and it’s absolutely great. And if they need to “reassess” these rules and criteria — it’s also okay. The only thing surprising to us, why would they need 3(!!!) years to do it? It seems to be far too long for such a rapidly developing industry as crypto. Three years from now the world could be a different place and we do not think that un-pausing VASP licensing in 2025 makes any sense.