This seven part series will highlight Fintech Regulations in several countries within Asia Pacific, namely:
- Malaysia;
- Philippines;
- Taiwan;
- Vietnam;
- Singapore;
- Thailand; and
- Korea.
Introduction
The Philippines has rapidly emerged as a hotspot for fintech innovation, driven by a burgeoning digital economy and a tech-savvy population. However, to ensure the stability and security of this sector, the country has implemented a comprehensive regulatory framework. In this article, we will explore the key regulations that govern fintech operations in the Philippines, while also delving into the main regulatory authorities overseeing this dynamic space.
Main Regulators for Fintech
Before we dive into the regulatory provisions, it’s essential to understand the primary regulatory authorities responsible for overseeing fintech activities in the Philippines:
- Securities and Exchange Commission (SEC): The SEC plays a crucial role in regulating fintech companies that engage in activities related to securities, investments, and crowdfunding platforms.
- Bangko Sentral ng Pilipinas (BSP): As the central bank of the Philippines, the BSP has a pivotal role in regulating fintech activities that involve payment systems, remittances, and digital currencies.
- Department of Information and Communications Technology (DICT): The DICT is actively involved in promoting digital transformation and ensuring the security of ICT systems in the Philippines, which intersects with fintech in terms of cybersecurity and infrastructure.
Now, let’s explore the regulatory framework that shapes the fintech landscape in the Philippines.
General Banking Law of 2000
The cornerstone of the Philippine financial regulatory framework is the General Banking Law of 2000 (Republic Act No. 8791). This law sets forth the fundamental standards and guidelines for banking and finance activities in the Philippines. While it may not specifically address fintech, it provides the overarching legal foundation for the sector.
Electronic Commerce (E-commerce) Act of 2000
The Electronic Commerce Act of 2000 (Republic Act 8792) plays a pivotal role in regulating the fintech landscape. This legislation seeks to create a secure legal framework for electronic commercial and non-commercial transactions and documents. Key provisions of this act include:
- Legal Recognition: It legally recognizes electronic data messages, documents, and signatures, providing a basis for their use in transactions.
- Formation of Contracts: The act legalizes the formation of contracts in electronic form, offering legal validity to agreements made through digital channels.
- Banking Transactions: It establishes the absolute nature of banking transactions conducted through ATM switching networks once consummated.
- Security Methods: Parties are granted the right to choose the type and security methods that suit their specific needs.
- Transport Documents: The act mandates the electronic implementation of transport documents to facilitate the carriage of goods.
- Consumer Protection: Existing laws, such as the Consumer Act of the Philippines, are deemed applicable to e-commerce transactions, ensuring consumer protection.
Bangko Sentral ng Pilipinas (BSP) Regulations and Initiatives
The Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, has also played a pivotal role in regulating fintech activities. Two significant BSP circulars are noteworthy:
BSP Circular No. 942 (issued on January 20, 2017)
This circular specifically targets remittance and transfer companies (RTCs), encompassing e-money issuers, remittance platform providers, remittance sub-agents, and money changers/forex dealers (MCs/FXDs). It outlines regulatory requirements and reporting obligations for these entities.
BSP Circular No. 944 (issued on February 6, 2017)
Circular 944 focuses on digital/virtual currency (VC) exchanges in the Philippines. It encompasses all institutions offering services related to trading, conversion between fiat currency and virtual currency, or vice versa. The circular aims to ensure transparency and accountability in the virtual currency space.
Data Privacy Laws
The Philippines is vigilant about protecting personal data through the National Privacy Commission (NPC). Fintech companies handling sensitive information of Philippine nationals and residents must adhere to data privacy laws, including the Data Privacy Act of 2012 (DPA) and its Implementing Rules and Regulations (IRR). Key requirements include designating a data protection officer (DPO) and registering with the NPC, along with compliance with NPC advisories and circulars regarding data processing activities.
Cybersecurity Laws and Regulations
Fintech businesses operating in the Philippines are also subject to cybersecurity laws and regulations, primarily governed by the Cybercrime Prevention Act of 2012 (CPA). This act imposes corporate liability for punishable acts committed on behalf of or for the benefit of a juridical person. These punishable acts include offenses against the confidentiality, integrity, and availability of computer data and systems, computer-related offenses, content-related offenses, and other offenses that may involve the use of computers.
Conclusion
In conclusion, while the Philippines welcomes fintech innovation, it does so within a robust regulatory framework. Fintech companies seeking to operate in the country must navigate a complex landscape that includes laws related to electronic commerce, data privacy, and cybersecurity. By complying with these regulations, fintech businesses can foster trust among consumers and contribute to the continued growth of the sector in the Philippines.
