There are significant developments in fintech in the Philippines. The changes are mainly in the areas of digital payment systems, digital banks, cryptocurrencies, and central bank digital currencies.
This sector is regulated by the Bangko Sentral ng Pilipinas (“BSP”).
DIGITAL PAYMENT SYSTEMS
- Maintains the platform that enables payments or fund transfers, regardless of whether the source and destination of accounts are maintained within the same or different institutions;
- Operates the systems or network that enables payments or fund transfers to be made through the use of payment instruments;
- Provides a system that processes payments on behalf of any person or the government; and,
- Performs such other similar activities, as may be determined by the Monetary Board.
Given the volume of OPS operators and to minimize the multiplicity of OPS services in the market, BSP Memorandum No. M–2023–005 required all OPS operators to adopt the QRPH standard (or National QR Code Standard) by 1 July 2023 to enable interoperability of payment systems. As the name implies, it requires the use of standardized QR codes that can be used and read by the different apps of the payment service providers.
To integrate with the ASEAN market, the BSP and four other central banks in the region announced that they will interconnect their respective domestic online payment systems through the Bank of International Settlement’s Nexus Project. The BSP also signed the Memorandum of Understanding in Regional Payment Connectivity with the Bank Indonesia, Bank Negara Malaysia, the Monetary Authority of Singapore, and the Bank of Thailand, to “connect instant payment systems and facilitate cross-border transactions for about 500 million people in the ASEAN region” (BSP – 2023 Status of Digital Payments in the Philippines).
DIGITAL BANKING
CRYPTOCURRENCIES
- 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.
VAs do not have legal tender status. However, VASPs are still considered money service businesses, which are “financial services that involve the acceptance of cash, checks, other monetary instruments or other stores of va1ue, and the payment of a corresponding sum in cash or other form to a beneficiary by means of a communication, message, transfer, or through a clearing network to which the service provider belongs.” Platforms like the Philippine Digital Asset Exchange (“PDAX”) are examples of VASPs as cryptocurrency platforms.
Barring a change in regulations, the three-year moratorium in granting VASP licenses will be lifted in 2025.
CENTRAL BANK DIGITAL CURRENCY
The BSP also has its own fintech initiatives. For instance, the BSP has been exploring issuance of its own Central Bank Digital Currency (“CBDC”) through Project Agila, and it is targeting to complete its pilot run by the end of 2024. A CBDC is “a digital form of central bank money that is denominated in a unit of account and functions as both a medium of exchange and a store of value” (Technical Working Group on Central Bank Digital Currency – Central Bank Digital Currency for the BSP, Fundamentals and Strategies). Unlike cryptocurrencies, a CBDC is considered to be money.
CONCLUSION
Technological advancements in fintech, partnered with the openness of Philippine regulators to innovations in the field, presents a business-friendly environment for future investors, while opening businesses and consumers to various options for smoother and flexible transactions. It also offers a solution for streamlining cross-border transactions.
This article is for informational and educational purposes only. It is not offered and does not constitute legal advice or legal opinion.
Roilan Rigil Kent A. Alonzo is an Associate of the Corporate and Special Projects Department of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW).
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