In an effort to balance a growing crypto industry with the potential risks associated with digital assets, the Central Bank of the Philippines is suspending new Virtual Asset Service Provider (VASP) licenses for three years.
In a memorandumBSP said its “modified approach” aims to strike a balance between promoting innovation in the financial sector and ensuring that potential risks remain at manageable levels.
This decision implies closing the regular application window for new VASP licenses for three years and granting new VASP licenses only to financial institutions supervised by the BSP (BSFI).
According to June 30 PASB datathere are currently 19 institutions with VASP licenses in the Philippines – five are still not operational, while one ceased operations in January.
“Recent market developments have necessitated the adoption of a modified approach to VASP licensing,” BSP Governor Felipe Medalla said in a statement, without giving details.
“[It] strategically focuses on assessing the overall performance and risk management systems of existing VASPs registered at Bangko Sentral, their impact on the financial services and financial inclusion agenda, and their contribution to achieving the objectives of the Digital Payments Transformation (DPTR) Roadmap,” Medalla added.
Over the past few months, the crypto market has seen a dramatic drop, with participants citing the so-called “crypto winter” as the reason for the price drop.
See related article: Philippines Central Bank Governor Says There Are No Plans To Ban Crypto
Under the new approach, existing OSFIs with strong risk management systems, including appropriate assessment of client suitability and client onboarding practices, as well as intensified education and financial consumer awareness, can still apply for a VASP license.
During this time, applications received by the BSP from non-BSFIs that have completed Stage 2 of the licensing process by August 31 will be processed and assessed for completeness and sufficiency of documentation or information based on Stage 3 requirements. Requests with incomplete requirements at the end of the month will be returned and considered closed.
Medalla, however, promised that the central bank would continue to step up its monitoring of developments in the digital space.
“The Bangko Sentral remains supportive and proactive in responding to developments in the digital financial ecosystem,” he said.