Published 16 January 2023, The Daily Tribune

Ever since the Covid-19 pandemic started, the Philippines and the world as a whole evolved. People are now more conscious and knowledgeable, particularly, consumers who became tech-savvy or technology dependent.

Key factors that contributed to this technological evolution include the use of cashless payments and the inevitable buzz that digital financial products created. As a result, startups operating as virtual assets service providers and e-money issuers increased. This sudden influx of financial technology or fintech businesses resulted in the Bangko Sentral ng Pilipinas imposing moratoria on the registration of digital banks, e-money issuers, and virtual assets service providers.

Notwithstanding the several moratoria imposed, BSP approved and implemented the Regulatory Sandbox Framework through BSP Memorandum Circular 1153. The Sandbox Framework aims to still support and invite game-changing and transformative innovation and improvement of the fintech industry by using a “test-and-learn approach”. The said framework creates a safe and secure environment, wherein fintech players can offer and deliver their new financial products in a controlled environment for a limited period of time.

The Sandbox Framework applies to all BSP-Supervised Financial Institutions, third-party service providers of the BSFIs, other BSP-registered institutions, and new players that intend to offer or use an emerging or new technology to deliver financial products or services about activities that could fall under the regulatory purview of the BSP.

However, to participate, they must have (a) a financial solution that can either be new/innovative or one that bridges a market gap in the delivery of financial products; (b) the capability to deploy the proposed solution; (c) initial test plans; (d) identified significant risks; (e) identified key performance indicators in monitoring the progress of the pilot implementation; (f) an acceptable exit and transition strategy after the experiment.

In the regulatory sandbox, an applicant will undergo a four-stage process, i.e., the application, evaluation, testing, and exit stage.

(a) The application stage is when an applicant collates and submits the required documents to BSP.

(b) The evaluation stage is when the BSP reviews the applicant’s documents and determines completeness, correctness, and suitability based on the eligibility criteria. Applicants who fail to qualify shall be informed of the reasons for rejection and shall likewise be allowed to file another application after six months from the release of the results.

(c) The testing stage is when the participants are given three (3) to 12 months from the go-live date to experiment and implement their test plan.

(d) The exit stage is the final phase, wherein the BSP decides the feasibility and propriety of introducing the sandbox activity to the general public. This stage is triggered by the completion of the sandbox activity or the incapability of the participant to continue with the sandbox activity. In this stage, a comprehensive evaluation of the whole experimentation occurs and the participant is required to submit a final report detailing the end-to-end result and the exit scenario.

In adopting the regulatory sandbox framework, the BSP balanced the need for innovation and the need for consumer protection. Testing new financial products in a controlled environment enables the participants to understand the needs of the market, while BSP is also given the chance to understand and develop the proper policies needed for the fintech industry.

For more of Dean Nilo Divina’s legal tidbits, please visit For comments and questions, please send an email to