[Exclusive] BSP: Crypto-to-Crypto Trading ‘Fits Naturally’ Under SEC; VASP Rule Amendments Planned

The Bangko Sentral ng Pilipinas (BSP) said crypto-to-crypto trading for speculative or investment purposes through an exchange “fits naturally” under the perimeter of the Securities and Exchange Commission (SEC), and confirmed it plans to expose amendments to Circular No. 1108, its 2021 rule governing Virtual Asset Service Providers (VASPs), for public comment, according to a written response provided to BitPinas.

The clarification comes amid questions around Binance’s return to the Philippines through an SEC Strategic Sandbox (StratBox) arrangement involving BlockShoals Technologies. This is described in a recent whitepaper released by its legal counsel Arden Consult as built around both the SEC’s CASP framework and BSP’s VASP regime.

BitPinas sought BSP’s own account of where its jurisdiction ends and the SEC’s begins, more specifically:

Offshore platforms operating via SEC sandbox participation paired with a domestic VASP
How BSP and SEC coordinate on StratBox oversight
Whether local VASP to foreign VASP satisifies the BSP’s “unbroken chain” rule
Crypto-to-crypto jurisdication

BSP’s full responses are also reproduced below.

Jurisdictional Shifts and Circular 1108 Amendments

The BSP stated that prior to the SEC’s issuance of Memorandum Circular Nos. 4 and 5 of 2025, the central bank covered crypto-to-crypto exchanges under the same framework used for money-changing and foreign-exchange dealing. It treated the process strictly as a value-conversion activity regardless of the underlying digital asset. (Read more: List of Licensed Virtual Asset Service Providers in the Philippines)

Following the SEC’s formal establishment of order-book trading and intermediation as regulated activities, the BSP noted that speculative crypto-to-crypto exchange through a trading venue “fits naturally under the SEC’s perimeter”. The central bank and the SEC are currently discussing where simple value conversion ends and investment-driven trading begins as the VASP framework evolves.

The central bank plans to release proposed amendments to Circular No. 1108 for public comment to reflect these regulatory updates. The BSP emphasized that its regulations remain anchored on Financial Action Task Force (FATF) guidance regarding anti-money laundering and payments risk, while the SEC draws from the International Organization of Securities Commissions.

Cross-Border Routing and Policy Conditions

BitPinas submitted a media inquiry outlining a transaction model where a licensed domestic Virtual Asset Service Provider (VASP) routes transactions to a global platform regulated by the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM). In response to this specific scenario, the BSP clarified the application of its “unbroken chain” rule under Circular No. 1108.

The central bank confirmed in general policy terms that routing transaction flows to a foreign platform can keep the chain intact, provided the offshore counterparty is duly authorized and licensed in its home country.
The BSP’s response did not state that any specific arrangement ‘complies’ with or is ‘cleared’ under the unbroken chain rule; its answer was limited to describing, in general policy terms, how the principle applies.

Both the domestic and foreign entities are expected to maintain and hold transaction, sender, and beneficiary information.

The BSP noted that this approach aligns with FATF guidance, but requires domestic institutions to conduct rigorous counterparty due diligence reviews.

Sandbox Limitations and VASP Compliance

The central bank stated that it defers to the SEC regarding its specific sandbox requirements and implementation. It noted that participation in the SEC’s Strategic Sandbox (StratBox) framework does not exempt entities from complying with applicable laws and regulations.

VASP activities and fiat transaction rails remain within the BSP’s purview and are not covered by the SEC sandbox. Domestic VASPs that partner with sandbox participants remain fully subject to all standard BSP regulatory and supervisory mandates.

BSP’s Responses, Published in Full

1. Does the BSP confirm that under current guidelines, an offshore platform layer can operate within the Philippine regulatory perimeter by separating its market conduct through an SEC sandbox participant and routing 100% of its fiat-to-crypto operations through an existing, licensed domestic VASP?

We defer to the SEC on its sandbox requirements and implementation. From the BSP’s perspective, entities engaging in activities within the BSP’s regulatory perimeter must obtain the appropriate BSP licenses and approvals. For VASPs, this requirement is reiterated in BSP Memorandum No. M-2026-003, Reminders on Sound Risk Management Practices when Dealing with Virtual Asset Service Providers (VASPs). While regulatory sandboxes provide flexibility and support responsible innovation, they do not exempt participants from complying with applicable laws and regulations or from maintaining appropriate safeguards. The BSP and the SEC continue to work closely to create cohesive regulations that foster innovation and protect customers.

2. In light of the cross-recognition established under BSP Memorandum No. M-2026-003, how do the BSP’s supervisory departments coordinate with the SEC to monitor the fiat-clearing legs of entities operating inside the SEC Strategic Sandbox (StratBox)?

The BSP and the SEC coordinate on matters relating to regulatory sandbox activities to ensure that no relevant laws/rules are circumvented and that non-negotiable control requirements, such as anti-money laundering (AML) requirements, consumer protection, and cybersecurity, are maintained. VASP activities within the BSP’s purview, however, are not covered by the SEC’s StratBox. Accordingly, VASPs that partner with StratBox participants remain subject to all applicable BSP regulatory and supervisory requirements.

3. The whitepaper notes that the BSP and the SEC are currently working toward closer structural coordination on digital-asset regulation, specifically through a potential joint circular or complementary regulations. Can the BSP confirm if it is currently co-drafting a joint instrument or shared enforcement guidance with the SEC regarding sandbox frameworks?

Yes, there is ongoing coordination between the BSP and the SEC to institute a more seamless supervisory process on VASPs and Crypto-Asset Service Provider (CASPs) while maintaining their respective supervisory frameworks. This includes establishing effective coordination mechanisms for sandbox applications involving activities within the respective jurisdictions of the BSP and the SEC.

4. On Cross-Border Routing and the ‘Unbroken Chain’ Rule: The whitepaper outlines a model where a licensed domestic VASP handles peso transactions and routes them to a global platform regulated by the FSRA of the Abu Dhabi Global Market (ADGM). In general policy terms* under Circular No. 1108, does routing transaction flows to a foreign-regulated platform satisfy the BSP’s “unbroken chain” requirement?

Yes. Circular No. 1108 provides that “a VASP shall only engage with other VASPs, financial institutions, and/or remittance and transfer companies that are duly authorized and licensed by the appropriate regulatory authorities.” It also requires that VASP transactions “shall only be undertaken with regulated VASPs and platforms to ensure that all VASP activities are executed within an unbroken chain of regulated entities.” This requires that counterparties, whether local or foreign, must be duly authorized and are subject to AML laws, rules, and regulations. This is consistent with the Financial Action Task Force (FATF) guidance, which encourages cross-border regulatory cooperation. It allows jurisdictions to recognize peer supervisory frameworks. provided that the domestic VASP/financial institution conducts rigorous counterparty due diligence to verify the regulatory standing of foreign counterparties.

Consistent with this, BSP Memorandum M-2026-003 reminds BSP-supervised financial institutions to deal only with offshore VASPs and counterparties that are duly registered/licensed/authorized to operate as a VASP or CASP in their home country, subject to appropriate due diligence reviews. On that basis, a domestic VASP routing pesos to a foreign-licensed platform can be seen as keeping the chain intact, as they are both expected to keep and hold the transaction information, and sender and beneficiary information.

5. On Crypto-to-Crypto Jurisdiction: The whitepaper argues that the “trading and intermediation of crypto-assets” sits strictly under the SEC’s sandbox perimeter, while only the peso-conversion leg belongs to the BSP. However, BSP Circular No. 1108 states that VASP activities include the “exchange between one or more forms of virtual assets.” We would like to seek clarity on the “crypto to crypto jurisdiction” since this is also a common question in the industry.

Prior to the issuance of SEC’s CASP rules and guidelines, BSP Circular No. 1108 already covers virtual asset-to-virtual asset/crypto-to-crypto exchange under the same lens used for money-changing and foreign-exchange dealing, treating it as a value-conversion activity regardless of the underlying asset.

With the issuance of the SEC’s MC Nos. 4 and 5 of 2025 which established order-book trading and intermediation as a regulated activity in its own right, crypto-to-crypto exchange conducted for speculative or investment purposes through an exchange or trading venue, fits naturally under the SEC’s perimeter, since that is the activity the CASP framework was built to address. Clarifying where simple value-conversion ends and investment-driven trading begins is an area that the BSP and the SEC are discussing as the VASP framework evolves alongside CASP rules.

The BSP’s VASP regulations are anchored on the FATF guidance/recommendations, while SEC’s rules and guidance draw from the International Organization of Securities Commissions’ recommendations/guidance.

The BSP plans to expose for public comments the proposed amendments to Circular No. 1108 to reflect market developments and relevant regulatory updates.

Listen to our latest episode

6. On Inter-Agency Coordination and the VASP Moratorium: Given the central bank’s ongoing moratorium on new VASP licenses, how do the BSP and the SEC coordinate to ensure that innovative testing frameworks or specialized intermediary tracks under the SEC perimeter align with the BSP’s broader licensing policies?

Please refer to the response to item 3.