BSP Circular No. 1166: Electronic Money Regulations in the Philippines Explained

BSP Circular No. 1166, Series of 2023, amended the regulations governing electronic money (E-money) and the operations of Electronic Money Issuers (EMI) in the Philippines. Approved by the Monetary Board under Resolution No. 122 dated 26 January 2023, it revised the pertinent provisions of the Manual of Regulations for Banks and the Manual of Regulations for Non-Bank Financial Institutions. The Circular sets out the policy, governance, liquidity, and capital rules that Bangko Sentral-Supervised Financial Institutions (BSFIs) must follow when issuing E-money. It took effect fifteen (15) calendar days following publication in the Official Gazette or a newspaper of general circulation.

What is E-money under the Circular?

The Circular defines E-money as electronically-stored monetary value that is:

1. Maintained in a non-interest-bearing, non-deposit transaction account;
2. Denominated in or pegged to the Philippine Peso or other foreign currencies;
3. Pre-funded by customers to enable payment transactions;
4. Accepted as a means of payment by the issuer and by other persons or entities, including merchants and sellers;
5. Issued against receipt of funds equal to the monetary value issued;
6. Represented by a claim on its issuer; and
7. Withdrawable in cash or cash equivalent, or transferable to other accounts or instruments that are withdrawable in cash.

E-money is not a deposit. It cannot earn interest or similar incentives convertible to cash that may be construed as earning interest. It must be issued and redeemed at face value, and may not be purchased at a discount where the credited balance exceeds the fiat money used to buy it.

Who is covered, and who is not?

The guidelines cover BSFIs that issue E-money and engage in E-money business in the Philippines. E-money issued under closed-loop electronic wallet systems is not covered. A closed-loop system is one where the electronic wallet is accepted as payment only by the merchant-issuer; merchant-issuers, including their subsidiaries and affiliates, are treated as one entity. An open-loop system, by contrast, is one where the wallet is accepted by persons or entities other than the merchant-issuer and its subsidiaries and affiliates.

How are e-money issuers classified and capitalized?

EMIs are classified as EMI-Banks or EMI-Non-Bank Financial Institutions (EMI-NBFI), which includes cooperatives.

For EMI-Banks, the required capital is the higher of the minimum capitalization for banks depending on bank category, or the EMI category requirement: PHP 200,000,000 for large-scale EMI-Banks and PHP 100,000,000 for small-scale EMI-Banks. The same amounts apply to EMI-NBFIs. Cooperatives that are EMI-NBFIs must maintain the higher of the required minimum capital for EMI-NBFIs and that prescribed under Republic Act No. 9520, the Philippine Cooperative Code of 2008.

An EMI is classified as large scale if the twelve-month average value of aggregated inflow and outflow transactions is equal to or greater than P25.0 billion. Once classified as large scale, it cannot revert to small scale unless approved by the Bangko Sentral, and it is expected to comply with the P200 million capital requirement within one year from reclassification.

What liquidity must issuers maintain?

BSFIs must hold sufficient liquid assets to meet E-money redemptions at all times, at least equal to the outstanding E-money issued for each currency in which the obligations are denominated.

For BSFIs with an outstanding E-money balance of at least P100,000,000.00, at least 50 percent of the outstanding balance must be held in trust for E-money balance liquidation, with the trust arrangement assuring preservation of principal and prudent management. The remaining percentage may be held in earmarked bank deposits, government securities, a BSP settlement account used by a non-bank EMI, or other liquid assets the Bangko Sentral allows. The trust account must not fall below the required minimum at any given day; a decline arising solely from marked-to-market losses is not a breach, provided the deficiency is topped up within five (5) banking days after month-end.

BSFIs with an outstanding balance below P100,000,000.00 may follow the same requirements, hold liquid assets equivalent to the total outstanding E-money balance, or hold other liquid assets the Bangko Sentral may allow. These liquid assets must remain unencumbered and are not subject to attachment.

What must be disclosed to users and merchants?

BSFIs must provide clear terms and conditions through channels including their website, brochures, and the registration form, and must obtain acknowledgement that users and merchants have read and understood them. The terms must cover, among others: the issuer ultimately responsible to holders; transaction types; all applicable fees and charges; foreign exchange risks and applicable rates for multi-currency wallets; availability of transaction history or statements; procedures for reporting lost or stolen E-money and lodging complaints; refund policy; rights and responsibilities; liability for damaged, lost, malfunctioned, or compromised instruments and fraudulent transactions; and customer service contacts plus the Bangko Sentral Consumer Assistance Mechanism.

Users and merchants must be notified at least thirty (30) calendar days before any amendment to the terms and conditions takes effect.

What sanctions and compliance deadlines apply?

Violations may be sanctioned under the Bangko Sentral supervisory enforcement policy, including a monetary penalty of any amount authorized by the Monetary Board not exceeding P100,000 a day for each violation until corrected. Where a BSFI with an outstanding E-money balance of at least P100,000,000.00 has a trust account below the required minimum, the penalty is one percent (1%) of the deficiency, not exceeding P100,000 per day. Non-monetary sanctions may also be imposed. Entities engaging in EMI operations without prior Bangko Sentral approval face enforcement action under Sections 18 and 19 of Republic Act No. 11211, the New Central Bank Act.

Existing BSFIs authorized to issue E-money had to submit a certification of compliance and an accomplished gap assessment template not later than three (3) months from effectivity of the Circular. The authority to engage in E-money business is revoked if operations do not commence within six (6) months after receipt of the notice of approval, or if the EMI becomes inactive for more than six (6) months after commencement.

Frequently asked questions

Is e-money covered by PDIC deposit insurance? No. Under the Circular, E-money is not considered a deposit. It is maintained in a non-interest-bearing, non-deposit transaction account and does not earn interest.

How much capital does an e-money issuer need in the Philippines? A large-scale EMI must have PHP 200,000,000 in required capital, while a small-scale EMI must have PHP 100,000,000, subject to the higher bank or NBFI minimum capitalization where applicable.

Can an e-money issuer operate without BSP approval? No. Any entity or person engaging in EMI operations without prior Bangko Sentral approval is subject to enforcement action under Sections 18 and 19 of Republic Act No. 11211.

Practical takeaways

• E-money is not a deposit, earns no interest, and must be issued and redeemed at face value.
• EMI-Banks and EMI-NBFIs must meet the higher of the applicable bank or NBFI minimum capitalization and the EMI category capital of PHP 200,000,000 (large scale) or PHP 100,000,000 (small scale).
• Issuers with at least P100,000,000.00 in outstanding E-money must hold at least 50 percent in trust and keep the rest in eligible liquid assets.
• Terms and conditions must be disclosed and acknowledged, with at least 30 calendar days' notice before any amendment takes effect.
• Violations can draw daily monetary penalties of up to P100,000 per violation, plus non-monetary sanctions.

Primary sources

The rules discussed above are drawn from the following issuances, embedded here in full for your reference.

Amendments to the Regulations on Electronic Money (E-money) and the operations of Electronic Money lssuers (EMl) in the Philippines (Reuploaded with Appendices)Open in Law LibraryDownload PDF

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.