- Infrawatch is asking the Central Bank whether it allows firms to acquire other firms to secure their own licenses.
- BitPinas receives a copy of the letter sent by Infrawatch to the BSP. The BSP has marked the letter as “Received.”
- The BSP has imposed a moratorium on crypto exchange applications for the next three years.
- Binance said this is not an issue for them because they are acquiring an entity that has the license.
- Binance recently conducted a blockchain forensics seminar together with DICT’s Cybercrime Investigation and Coordination Center and other law enforcement agencies.
Editing by Nathaniel Cajuday. Additional Reporting by Michael Mislos
Infrawatch PH convenor Terry L. Ridon has sent a letter to the Central Bank asking if the BSP allows backdoor acquisitions, following the report that international cryptocurrency exchange Binance is currently acquiring a local firm that has both a VSP and EMI License from the Bangko Sentral ng Pilipinas (BSP). The think tank also requested the BSP to review existing entities with the licenses.
To push through with acquiring a virtual asset services provider (VASP) and electronic money issuers (EMI) licenses, Binance Philippines General manager Kenneth Stern said they are currently in negotiations to acquire a BSP-licensed and regulated local company that has both those licenses. This is, so far, a way for the exchange to obtain a license after the central bank officially imposed a ban on VASP license applications last month. (Read more: Binance Exec Reveals Plans to Acquire PH Firm that Will Secure VASP License)
“While we welcome BSP’s initiative to shift its focus to ‘assessing the existing Bangko Sentral-registered VASP’s overall perform and risk management systems, their impact on financial services and financial inclusion agenda, and their contribution towards the achievement of the Digital Payments Transformation Roadmap (DPTR) objectives,’ we are requesting clarification on whether the VASP application moratorium also prohibits any and all backdoor acquisition of existing entities with VASP licenses by new market entrants,” the letter from Infrawatch PH reads.
Moreover, the think tank highlighted that they also want clarification if all entities with both licenses are currently operational. A VASP license is a regulatory requirement to allow entities that facilitate exchange between virtual assets and fiat currencies, virtual assets to virtual assets, custody, or transfer of virtual assets to operate in the country. (Read more: List of Philippine Financial Institutions Both VASP and EMI Licenses)
“It is our position that a particular clarification on this question needs to be made in light of recent developments, as failing to prohibit any and all backdoor acquisition of existing entities with VASP licenses will defeat the objectives of BSP Memorandum No. M-2022-35,” Ridon emphasized.
Accordingly, at the end of their letter, the think tank stated that they are “praying” that the BSP will issue a clarification on whether the VASP moratorium also prohibits new market entrants from utilizing backdoor acquisition of existing entities with VASP licenses, “reject the backdoor acquisition of existing entities with VASP licenses by new market entrants such as Binance,” and “review, suspend, or revoke the VASP license of entities which have failed to operate within a specific period of time.”
“Our fears are not without basis as regulators in several jurisdictions have already initiated investigations involving money laundering, fraud, illegal securities, and other illicit activities committed through Binance,” the letter concluded. “In fact, Binance has already been warned, banned, or restricted for non-compliance with existing laws and regulations and even facing criminal investigations in foreign jurisdictions, including the United States of America, Japan, the United Kingdom globally, and Malaysia, Thailand, Indonesia, and Singapore in Southeast Asia to name a few.
Binance in the Philippines
But while there are jurisdictions that appear to be investigating Binance, in the Philippines, Binance has been in the news as of late for different reasons.
Two weeks ago, Binance partnered with the Department of Information and Communications Technology (DICT) – Cybercrime Investigation and Coordination Center (CICC) to conduct blockchain forensics seminar with law enforcement agencies. Binance’s Head of Intelligence and Investigations for Asia Pacific Jarek Jakubcek delivered, among other things, an overview on how crypto exchanges interact, how crypto transactions are traced, and an overview of the most common cybercrime activities.
The seminar was attended by CICC Deputy Director Mary Rose Magsaysay, and PCol. Armel Gongona, Deputy Director of Administration of the Philippine National Police (PNP) Anti-Cybercrime Group.
- Binance, CICC Conduct Blockchain Forensics Seminar for PH Agencies to Fight Crypto Crime
- Binance & PH Cybercrime Unit Detail Crypto Crime Reports
Binance most recently announced a Global Advisory Board, whose purpose is to provide Binance with advice on some of the most complex regulatory, political, and social issues the entire crypto industry faces as it rapidly grows and evolves.
In a previous interview with BitPinas, Binance APAC Head Leon Foong said acquiring the license in the Philippines is a priority for them, while also highlighting the licenses they received in other countries.
“If our internal processes were not up to the minimum standards, we will not be able to obtain licenses in the likes of France, Italy, Spain, Dubai, Abu Dhabi, Bahrain. These are all licenses that we’ve got recently within the last six to nine months, I think it’s a testament to you know how much we’re invested in our internal controls and compliance,” Foong said.
“By having more and more global players in the market of global liquidity, what this offers to users in Philippines is choice. But if you take away that choice from the users, the ultimate people who already lose out is the everyday person who wants access, who wants inclusion into the new age financial system. So I think one thing that’s really close to our heart is really financial inclusion, and financial empowerment,” Foong added.
Prior to this, Infrawatch has been actively sending letters to the financial regulators to ban Binance since June of this year, when it first sent a letter to the central bank to suspend and ban the cryptocurrency exchange from operating in the country without the necessary licenses to do so. (Read more: This is Binance’s Response to PH Policy Group Asking the BSP to Ban it in the Philippines)
In July, Infrawatch sent another letter and it was for the Department of Trade and Industry (DTI) Secretary Ramon Lopez where it asks the department to investigate on Binance over its local promotion offers without securing proper permits in the country. (Read more: Binance Answers Infrawatch PH’s Letter to DTI)
For the third time, it requested the government to ban the operations of exchange giant Binance in the country. This time it sent the letter to the Securities and Exchange Commission (SEC). The Commission responded by cautioning the public not to invest with Binance. (Read more: [Exclusive Interview] Binance APAC Reveals Plans in the Philippines, Says Acquiring VASP License is a Priority)
For other news, check out the timeline of events here:
- (June 8) CZ visited the Philippines and talked to PH Media re: Binance expansion.
- (June 8) CZ said they intend to obtain a local crypto license.
- (June 9) Then Finance Secretary Dominguez said Binance is not yet registered and they are monitoring it.
- (June 10) Binance Scholarship for Filipinos.
- (June 15) Infrawatch PH sent a letter to the BSP asking it to ban and suspend the exchange for illegally operating here.
- (June 16) Binance responds: “We are open to discussions”.
- (June 16) Binance is hiring 2,000 more people.
- (July 7) Infrawatch Letter to DTI.
- (July 7) Binance Answers New Infrawatch Letter.
- (July 11) DTI Responds.
- (July 26) Infrawatch sends letter to SEC.
- (August 4) SEC responds, cautioning the public not to invest with Binance.
- (August 9) Binance says acquiring license is a priority
- (September 20) Binance is targeting to acquire a PH Firm to secure VASP License.
- (September 28) Infrawatch PH asks BSP if the backdoor acquisition of the VASP License, which Binance is currently doing, is allowed.
This article is published on BitPinas: Infrawatch PH to BSP: Is Backdoor Acquisition of VASP License Allowed?
Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.