Axie Infinity was not considered as a virtual asset service provider, according to BSP.
The Bangko Sentral ng Pilipinas (BSP) said that popular online play-to-earn game Axie Infinity wasn’t considered as a virtual asset service provider (VASP).
Manila Bulletin reported that the Bangko Sentral ng Pilipinas emphasized in an email interview with Business Bulletin that it didn’t consider Axie Infinity as a VASP and was critically monitoring how players were using and exchanging tokens or cryptocurrency assets known as “Smooth Love Potion (SLP)” as a form of payment and the extent of its merchant network.
However, the BSP said that it was also looking into its possible classification as an Operator of Payment System (OPS).
Currently, the BSP’s jurisdiction over cryptocurrency-related activities covered VASPs. As such, the BSP was watching how the blockchain gaming app participants were dispensing non-fungible tokens (NFTs) to pay for services and goods.
An OPS can be bills payment service providers, cash-in service providers, and entities such as platform providers, payment gateways, payment facilitators, and merchant acquirers that allow sellers of services and goods to accept payments in cash or digital form.
Once the Bangko Sentral ng Pilipinas has determined that Axie Infinity players were using and exchanging tokens or cryptocurrency assets known as “Smooth Love Potion (SLP)” as a form of payment for purchases, it will require Sky Mavis or its local partner to register with the central bank as an OPS, otherwise it should stop operating.
The BSP’s regulatory framework for virtual asset service providers allowed end-users to exchange fiat (physical money) currency to crypto assets in order to acquire NFTs for game applications and to convert the same back into fiat currency.
Manila Bulletin reported that BSP Circular No. 1108 or the Guidelines for VASPs issued in January this year, basically recognized the evolving virtual asset systems or markets, and its attendant risks because of its anonymity, volatility of prices, and “velocity” of transactions.
Once fiat money was exchanged or converted into virtual assets, it was easily transferrable and used for payment, and this was the reason why VASPs were considered as money service businesses and under BSP regulation.
However, the Bangko Sentral ng Pilipinas said that Axie Infinity wasn’t a VASP because the scope of BSP Circular No. 1108 excluded “digital units of exchange used as in-game tokens, such as the implementation of SLP within Axie Infinity”.
Thus, the central bank’s ongoing monitoring aimed to find out if Axie Infinity activities could be considered as an Operator of Payment System.
As an Operator of Payment System, it was required to register with the BSP based on another memo, Circular No. 1049 which provided the rules for the registration of OPS.
According to the BSP, its “attention” was focused on VASPs that provide consumers with the means to exchange fiat money to virtual assets in order to acquire NFTs as well as the redemption back to Philippine peso.
As such, the Bangko Sentral ng Pilipinas said that it was aware of and actively monitoring the recent activities related to merchant acceptance of SLPs as a form of payment for services and goods.
The OPS circular was the central bank’s basis when it suspended and then cancelled the registration of LYKA local partner Digital Spring last July. Based on LYKA’s activity, the BSP said that it was an OPS. LYKA/TIL was slapped with a cease-and-desist order until it registered with the Bangko Sentral ng Pilipinas.
The BSP said that both the central bank and the Securities and Exchange Commission (SEC) recognized the financial innovations involving NFTs and “have been developing regulations that ensure adequate regulation of these systems and their service providers”.
Meanwhile, the Bangko Sentral ng Pilipinas has registered 15 VASPs as of July 31, 2021. As registered VASPs, they’re allowed to facilitate the trading of virtual assets into the local currency and vice-versa.