Philippines Cryptocurrency License (VASP)

Tetra Consultants assists our international clients to obtain Philippines Cryptocurrency License, also known as Philippines VASP License, which is needed for virtual asset transactions and services. Our service package includes Philippines company registration, business account opening, license application including advisory services, compliance review, and preparation of business plans.

Company Registration

3 Weeks

Local Director?

No

Bank Account Opening

4 Weeks

Travel Required?

No

Excellent

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    Philippines Cryptocurrency License (VASP)

    Philippines Cryptocurrency License, also known as Philippines VASP License for Virtual Asset Service Providers, is hassle-free to obtain with Tetra Consultants’ assistance.

    The Philippines were one of the original leading pioneers in the regulation of virtual currencies (VC) in 2017 with the development of their original Certificate of Registration for VC exchange services. As announced in the news, with the increasing popularity of cryptocurrency not only within the Philippines but around the world as well, the regulator and central bank of the Philippines, Bangko Sentral ng Pilipinas (BSP) have updated both their regulatory and licensing framework in 2021 to comply with the money laundering regulations of the Financial Action Task Force (FATF) and increase the coverage of the policy act.

    Introduction to Philippines Cryptocurrency License (VASP)

    • Under the new framework, virtual currencies have been rebranded to virtual assets (VA). Not only is this the term used by the FATF, thereby minimizing confusion between both terms, but it is also more inclusive since it covers a broader spectrum of financial products and services. It is now taken to include the potential of such assets to be used as payments and investments.
    • Given this broad-based definition, BSP recognizes both the benefits and risks of the speed and convenience offered by virtual asset systems and has thus taken steps to “encourage financial innovation while safeguarding the integrity and stability of the financial system” by ensuring compliance to not only the money laundering regulations previously mentioned, but also terrorist financing and proliferation financing regulations. Steps have also been taken to appropriately manage other risks of such virtual asset systems, such as investor protection, privacy policy and information technology risks.
    • With these steps, the BSP has ensured that virtual asset service providers in the country are able to enjoy the certainty and protection of a well-defined regulatory framework, making the Philippines one of the up and coming jurisdictions to base your cryptocurrency business in.
    • Those who choose not to comply with these regulations will face monetary penalties and sanctions. More blatant violations, such as operating without prior registration might even result in your company being disqualified from subsequent registration.

    When will you require a Philippines Cryptocurrency License (VASP)?

    philipines-cryptocurrency-license-activities

    • Virtual Asset Service Providers are defined as any entity that offers one or more of the following activities.
      • exchange between VAs and fiat currencies
      • exchange between one or more forms of VA
      • transfer of VAs
      • management and/or safekeep of VAs or tools facilitating the management of VAs
    • Firms carrying out activity (iv) will be known as VA Custodians (the equivalent to cryptocurrency wallet service providers in other nations such as the United States).
    • Entities that were registered under the previous virtual currency exchange license or non-registered entities must re-apply for the new VASP license by 16 May 2021. They must then comply to all regulations by 16 August 2021 or face the penalties mentioned above. Prospective VASPs should secure the Philippines VASP license before commencing operations which involve any of the activities above.
    • If you are unsure whether your business requires the Philippines VASP License, feel free to speak to us for a non-obligatory consultation. Our team of experts will revert within the next 24 hours.

    Requirements for Philippines Cryptocurrency License (VASP)

    Rules and regulations

    • Prospective VASP licensees must secure a Certificate of Authority to operate as a Money Services Business (MSB) first and comply to all relevant rules and regulations.
    • Additional rules and regulations from the BSP that VASPs need to comply to include:
      • Outsourcing
      • Liquidity and operational risk management
      • IT risk management (including IT outsourcing/vendor management program)
      • Business continuity management
      • Internal control
      • Anti-money laundering
      • Financial consumer protection
      • Other general rules which all companies are subject to, such as corporate governance principles

    Fees and minimum capital requirements

    • All VASPs also need to pay a registration fee of ₱100,000 (US$2,100). They will subsequently be subject to an annual service fee of ₱300,000 (US$6,300). These fees will be the same for both VA custodians and regular VASPs.
    • However, VA custodians (firms that intend to carry out safekeeping and/or administration of VAs or instruments enabling control over Vas) are subject to a higher minimum capital requirement of ₱50 million (US$1.05 million) as compared to regular firms, who only require ₱10 million (US$0.21 million).

    Internal controls and reporting requirements

    • Internal control systems and solutions fitting to the nature, size and complexity of the company must also be put in place and enforced by qualified personnel. This includes ensuring that the board of directors and key appointments overseeing critical control functions such as compliance, information security, audit and anti-money laundering are held by fit and proper candidates in accordance with the standard corporate governance procedures.
    • These officers should ensure the submission of the Annual Financial Statements that have been audited by an external auditor no later than 120 calendar days after the close of the referenced year. A quarterly certified submission of the total volume and value of VAs transacted alongside the list of operating offices and websites will also be required no later than 10 working days after the end of the referenced quarter.

    Due Diligence checks on customers

    • VASPs are required to conduct due diligence checks on both their recurring and one-off customers. One-off customers will only be subject to due diligence checks when the combined value of their linked transactions exceed ₱5,000 (US$105). VASPs should also conduct a search when there is reason to suspect the authenticity or completeness of previous checks, or when there is suspicion of money laundering and terrorist financing activities.

    Additional requirements on high value transactions

    • Transactions associated with a VA transfer that is worth more than ₱50,000 (US$1,050) requires that additional information be tracked and transmitted by both the originating and beneficiary institution alongside such a transaction, and for both parties to ensure that the details are accurate and made available to the relevant authorities if needed.
    • This additional information on transactions include:
      • Originator’s and beneficiary’s name
      • Originator’s and beneficiary’s account number
      • Originator’s personally identification documents. This can include:
        • Proof of address
        • National identity number
        • Date and place of birth
        • Customer identification number that can uniquely identify the originator
    • Transmission of these information should be done immediately and securely, and VASPs should also take the necessary measures to ensure that the information remains confidential and no unauthorized disclosure occurs.
    • Larger transactions of ₱500,000 (US$10,500) and above are subject to stricter due diligence checks and can only be done through cheque, direct credit or account to account transfers.

    Consumer protection

    • VASPs must ensure that their customers are aware of how to safeguard their personal data and how to use the provided platforms safely. The fees and charges of using these platforms must also be made known, alongside the material risks regarding VAs. They must also explain the terms and conditions on how losses from system or human errors will be settled.
    • Lastly, they must set in place procedures to handle customer complaints and for problem resolution.

    Wallet Security

    • VASPs that provide wallet services that hold virtual or fiat currencies must have adequate cybersecurity and security frameworks with controls and measures in place to ensure confidentiality, integrity and availability of the data and information that is being uploaded, stored, processed and transmitted through their system. Similarly, these systems must be protected against malware and cyber-attacks.

    Additional requirements

    • VASP firms must take the adequate care in selection of the other VASPs and VAs they deal with. These should be appropriately licensed or accredited respectively, and fraud risk management systems should be put in place.
    • VASP firms with fiat wallets should have sufficient liquidity to ensure that VA redemptions can be met at all times. All transactions or receipts of fiat money should also be appropriately documented.
    • Firms operating as VA custodians must also have similar recording systems and should also prevent commingling between customers’ VAs and their proprietary VAs. They should also hold reserves equivalent to the amount of VAs held in custody.
    • Even when VASPs outsource services to other firms, they will be taken as to have been performing the service directly. Hence, they will be liable for the risks associated with outsourcing and should conduct proper risk management to mitigate this.
    • They must also comply with all other applicable rules or requests for information from either the BSP or from other regulatory government authorities.

    How long to secure Philippines Cryptocurrency License (VASP)?

    • Each Philippines VASP License will be individually reviewed by the BSP to ensure compliance to all the stated requirements and the suitability of the company. The standard processing timeline given by BSP is 40 working days, excluding certain steps. Hence, it is expected to take around 2 months. If the information provided is inaccurate, incomplete or inconsistent, they might revert back with a clarification request or request for further information, which might delay the process.

    How to apply for Philippines Cryptocurrency License (VASP)?

    • Applying for a Philippines Cryptocurrency License is a three stage process. This can be done through the online portal, through mail or in person.

    Stage 1: Application for BSP Approval to Establish and Operate as Money Service Business

    • Required documents:
      • Signed letter of application with authorized representative and details
      • Type of license applying for
      • Articles of Incorporation
      • Business plan with the following details:
        • Purpose of business
        • Type of corporate entity and Organizational Structure
        • Products and services offered including the features and functionalities of the platform/facility
        • Capital Requirements and details of funding source
        • Target market (number or social profile of customers) and network (number of offices)
        • Estimated Annual Volume of Transactions for three years
        • Operational Workflow from account opening including AMLA process, transaction initiation to fulfilment and settlement process
        • Consumer complaints and problem resolution process and solutions
        • Proposed transaction fees
        • Information on IT infrastructure
      • List of owners, controlling shareholders, directors and principal officers with the following information:
        • Name
        • Citizenship
        • Birthday
        • Address
        • Position
        • Taxpayer Identification Number
        • Amount contributed and % ownership
        • Number and email address
    • The key officers and board members should also complete the Personal Data and Authorization Form, FSS Licensing Form No. 03-005, and submit a security clearance
      • Proof of financial standing by submission of either bank certification or latest audited annual financial statement
      • Notarized certification by representative director that funds were not fraudulently obtained
      • Proof of registration with Anti-Money Laundering Council Secretariat
      • Proof of payment for registration and filing fee
      • Additional information regarding the processes of the firm might also be requested. These include:
        • System and user manual
        • Terms and conditions
        • Contracts between the firm and outsourcing partner
        • Business Continuity Plan
        • Policies and procedures on Due Diligence, KYC, and other risk management aspects
        • Walk-through of the system
    • Alongside the submission of these documents, a non-refundable filling fee of ₱1,000 (US$21) must also be paid. After this, your application will be taken for provisional assessment and processing.
    • Your company will then be required to present the business plan and conduct the system walk-through. Tetra Consultants will be on hand to ensure that this meeting goes smoothly and to prepare you for potential questions. We can also assist in drafting the Articles of Incorporation, business plan and other processes.
    • Thereafter, they will take 20 working days to process and evaluate your application. Upon approval, you may proceed to the next stage of the application process and are allowed to operate as an MSB. You will receive both an e-mail confirmation and a physical copy of the letter will be mailed to you.

    Stage 2: Application for Issuance of Letter of No Objection to Register with the Securities and Exchange Commission (SEC) the Articles of Incorporation (AOI) indicating its purpose to operate as MSB operator for corporations

    • Required documents:
      • Email notification indicating you should proceed to Stage 2
      • Application letter for issuance of Letter of No Objection with the BSP reference number indicated
      • Proof of compliance as a Money Services Business
    • With the submission of these documents, your application will be sent in for Stage 2 processing, which is estimated to take 7 working days to review and evaluate. Upon approval, you will receive an email and original copy of the letter.

    Stage 3: Application for Insurance of Certificate of Authority to Establish and Operate as Money Services Business

    • Required documents:
      • Email notification indicating you should proceed to Stage 3
      • Notarized Application for Authority to Establish and Operate a Money Service Business, FSS Licensing Form No. 03-001
      • Certified true copy of Articles of Incorporation and Certificate of Registration
      • Copy of business license from the municipal authorities
      • Notarized Deed of Undertaking, FSS Licensing Form No. 03-003
      • Proof of attendance for AML-CFT training
    • The last and final step of the application is estimated to take 13 working days after submission of all the necessary documents. Proof of payment of the registration fee must also be submitted. Thereafter, firms will receive the same email and physical letter confirmation indicating that they can now legally participate in VA activities.

    Need a Philippines Cryptocurrency License (VASP)?

    FAQs

    What is the difference between a VC and VA?

    • VC refers to virtual currency, which is an outdated definition.
    • VA refers to virtual assets, which includes VCs in the traditional sense of currency but also as an asset for payment and investment purposes. The definition of a VA also includes other terms in the FATF recommendations such as “property”, “proceeds” and “funds”.

    What is the difference between a VCE and VASP?

    • Similarly to the difference between a VC and a VA, the definition of a virtual asset service providers expands on the traditional definition of a virtual currency exchange to not only include firms involved in the exchange of fiat and crypto currencies, but also those who are providing exchange, transfer or custodian services.

    Why was there a change from VC/VCE to VA/VASP?

    • This ensured a new standardization of terms used by the BSP and Philippines crypto market with the Financial Action Task Force. It also allows it to be more responsive and inclusive of the growing spectrum of business activities within the virtual assets markets.

    What is an MSB?

    • MSB refers to Money Services Business. This refers to firms that provide financial services by receiving and accepting cash or other traditional monetary instruments. Such firms cannot receive or accept payment through cryptocurrency.

    What is an EMI?

    • EMI refers to electronic money issuer. They provide money transfer or remittance services through electronic or digital financial services but do not deal with virtual assets or currencies.

    Is cryptocurrency legal tender?

    • Legal tender currencies refer to currencies issued and guaranteed by the regulatory body of a country and recognized as a real, legitimate form of payment. Since cryptocurrencies are not issued or guaranteed by the BSP, they are not legal tender.

    Are cryptocurrencies legal or regulated in the Philippines?

    • Although cryptocurrencies are not legal tender, they are still legal and regulated by the BSP under the content of Section 902-N of the Manual of Regulations for Non-Banking Financial Institutions, on Virtual Asset Service Providers.






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