Philippine Central Bank to Suspend New Registrations for Payment Service Providers for 12 Months, Considering Enhanced Supervision of VASPs

The Philippine Central Bank has announced a proposal to suspend new registrations for OPS (Payment System Operators) for a period of 12 months.

The proposal includes a review of the classification of payment service providers and the licensing system, as well as plans to strengthen the monitoring of transactions involving VASPs (Virtual Asset Service Providers). The Philippine Central Bank has published a draft circular aimed at enhancing the management framework for payment transactions, proposing to halt the acceptance and processing of new applications from payment service providers for 12 months. During this period, a comprehensive review of the classification system for payment service providers, licensing regulations, risk management rules, and supervisory frameworks will be conducted.

The background for this decision stems from concerns that, while mobile payments and QR code payments are becoming more widespread, the complex intermediary structures make it difficult to track actual merchants and the flow of funds. Although applications submitted before the suspension measures begin will continue to be reviewed, no final decisions on approval or rejection will be made until the suspension period ends.

Additionally, unless separately authorized by the Philippine Central Bank, no new activities requiring the registration of payment system operators can be initiated during the freeze period.

This measure is currently in the proposal stage, and the Philippine Central Bank is soliciting public comments. If finalized, the regulations are expected to take effect 15 days after publication.

Strengthening Merchant Supervision by Requiring Direct Contracts with VASPs

The draft proposal requires financial institutions providing payment services to merchants under the supervision of the Philippine Central Bank to conduct transactions with regulated VASPs through direct contracts with merchants, without intermediaries.

The targeted VASPs are those licensed, registered, or authorized by regulatory authorities such as the Philippine Central Bank and PSEC (Philippine Securities and Exchange Commission), and are treated as high-risk entities alongside gambling operators, gaming operators, adult businesses, and money service businesses.

Transactions with these merchants will be subject to enhanced due diligence, ongoing transaction monitoring, and management measures tailored to the risks, including limits on transaction amounts and payment amounts.

Furthermore, if significant fraudulent activities, cyberattacks, data breaches, or unauthorized commercial activities are detected, the proposal includes a requirement for supervised financial institutions to report within 24 hours.

The Philippine Central Bank is also planning to establish a nationwide database to track merchants utilizing domestic standard QR code payments.

The database will manage merchant information, payment accounts, the payment service providers used, and risk classifications, aiming to create a system that allows for clearer tracking of the flow of funds from merchants receiving payments to the financial institutions processing transactions.