Safe (e)money: BSP Updates E-money Regulations, Increases Prudential and Capitalization Requirements

On February 7, 2023, the Bangko Sentral ng Pilipinas (BSP), the Philippine Central Bank, issued BSP Circular No. 1166, series of 2023, entitled “Amendments to the Regulations on Electronic Money (E-money) and the Operations of Electronic Money Issuers (EMI) in the Philippines” (EMI Circular). It was published on February 15, 2023 and took effect on March 2, 2023.

The EMI Circular supersedes BSP Circular No. 649 and amends the relevant provisions of the Manual of Regulations for Banks (MORB) and Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) on electronic money (EMoney) issuance.

The EMI Circular should be of interest to all BSP- Supervised Financial Institutions (BSFIs) that issue E-money or engage in the E-money business in the Philippines. All parties interested in entering the Philippine E-money market should also take the EMI Circular under consideration.

Key provisions

  • Updated and New Definitions. The EMI Circular provides updated definitions of key terms such as e-money, electronic instruments, transaction account, closed-loop electronic wallet system, open-loop electronic wallet system, and merchants, that may determine applicability of the regulations to an entity.
  • Amended Classification. The EMI Circular characterizes EMIs as either EMI-Banks or EMI-Non-Bank Financial Institutions (EMINBFIs). The classification as “EMI-Others” under the previous regulations has been removed.
  • Minimum systems and controls. The EMI Circular sets guidelines on the issuance and operations of E-money. These include having in place minimum systems and controls prior to issuance of e-money and minimum disclosure requirements which now provide for a period when the disclosure should be made, and liquidity requirements. Covered entities are also required to adhere to the BSP Financial Consumer Protection regulations, including the following requirements:
    • EMIs shall provide clear terms and conditions on the use of E-money, which should be made available through various channels.
    • EMIs must obtain acknowledgement from their users and merchants that they have read and understood the terms and conditions prior to their availment of Emoney services.
  • Requirement for Interoperability of Systems. BSFIs shall make their E-money products/services/platforms with fund transfer functionality interoperable by participating in an Automated Clearing House pursuant to the guidelines set under the National Retail Payment System (NRPS) Framework.
  • Aggregate Limits.Under the EMI Circular, the PhP100,000 aggregate monthly load limit was removed. EMI-BSFIs shall adopt a client categorization process in order to implement pre-defined limits and thresholds based on institutional risk assessment and customer due diligence process. For EMI-NBFIs facilitating large value pay-outs of more than PhP500,000 or its equivalent in foreign currency, in any single transaction with customers or counterparties, enhanced due diligence shall be conducted and said pay-outs shall be done through banks using check payments or electronic fund transfer facilities.

The BSP highlights the higher capitalization and liquidity requirements for EMIs as a reaffirmation of its commitment to promoting a safe, secure, and inclusive financial environment. The EMI Circular’s expanded definitions also consider recent developments in digital technology.

All current EMIs are given one year to comply with the EMI Circular. Registration of new EMIs, however, are still under moratorium until mid-December 2023 pursuant to BSP Memorandum No. M-2021-064.

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