PH Crypto Oversight Improves, But FATF Flags Gaps on DeFi, Stablecoins, Offshore Exchanges

Disclaimer: This article is for informational purposes only and does not constitute financial advice. BitPinas has no commercial relationship with any mentioned entity unless otherwise stated.

📬 Get the biggest crypto stories in the Philippines and Southeast Asia every week — subscribe to the BitPinas Newsletter.

The Philippines has met several key regulatory benchmarks for virtual asset oversight, including virtual asset service provider (VASP) licensing and Travel Rule compliance, according to the June 2025 update from the Financial Action Task Force (FATF), the global anti-money laundering watchdog.

However, despite the country being recently removed from the watchdog’s “Grey List,” FATF said PH remains rated “Partially Compliant” due to persistent implementation and supervision gaps.

Key Details

According to the FATF:

• The Philippines has conducted a national risk assessment for virtual assets and virtual asset service providers.
  • Previously, the Securities and Exchange Commission (SEC) mentioned that their advisories against illegal crypto schemes aided in the country’s exit from the FATF Grey List.
• Rules are in place requiring VASP registration and compliance with anti-money laundering/countering the financing of terrorism rules.
• Registered VASPs are active and subject to inspections.
• Enforcement actions against non-compliant VASPs have been taken.
• The Philippines has also implemented the Travel Rule, but the watchdog says the country must further strengthen enforcement.

The FATF report, which reviewed 163 jurisdictions, rated the Philippines as partially compliant with Recommendation 15, which directs countries to ensure that “virtual asset service providers are regulated for anti-money laundering (AML) and counter-terrorist financing (CFT) purposes, licensed or registered, and subject to effective systems for monitoring and ensuring compliance.”

Gaps and Limitations

• The Philippines’ supervisory regime has not yet met FATF’s “Largely Compliant” or “Compliant” thresholds.
• No updated technical reassessment has been conducted since 2020.
• The FATF update did not detail country-specific challenges, but general concerns apply globally.

“Jurisdictions should ensure full implementation of R.15, including identifying natural or legal persons that conduct VASP activities.”

FATF, Targeted Update Report 2025

The FATF emphasized that across all regions, jurisdictions face difficulties enforcing the Travel Rule and identifying unlicensed or offshore operators.

This insight was shared by the United Nations Office on Drugs and Crime (UNODC), which previously recommended that Southeast Asian countries declare the operations of unlicensed VASPs and money service businesses as a criminal offense. 

Context Within Southeast Asia

Examining the FATF report and comparing the Philippines with the rest of its Southeast Asian neighbors:

• The Philippines stands out regionally for having enacted legislation, conducted inspections, and taken enforcement action.
• It is ahead of several ASEAN peers that have not licensed VASPs or implemented the Travel Rule.
• However, it shares a “Partially Compliant” rating with countries still developing their supervisory systems.

Warning on Stablecoins and DeFi

While the FATF report does not single out the Philippines, it warns globally about the increasing use of stablecoins and decentralized finance platforms in illicit finance.

• It noted that the widespread adoption of stablecoins could reduce reliance on regulated entities.
• FATF also said DeFi tools are increasingly exploited through mixers, cross-chain bridges, and unhosted wallets. (Read more: What is the FATF Guidance on DeFi)

The watchdog expects jurisdictions globally to assess these risks and develop appropriate supervisory responses as part of their compliance.

“Mass adoption of stablecoins could potentially decrease the use of AML/CFT-obliged entities.”

FATF, Targeted Update Report 2025

Recommendations of the FATF to Jurisdictions

FATF is recommending to partially compliant jurisdictions to improve their supervision, enforcement, and risk monitoring.

“Supervisors and investigators should enhance public-private sector collaboration and international cooperation to address challenges in recovering stolen funds.”

FATF, Targeted Update Report 2025

Below is the full list of recommendations from the FATF to jurisdictions that are not yet fully compliant:

1. Fully Implement Recommendation 15 (R.15)
   • Enact and enforce laws requiring registration/licensing of all VASPs.
   • Ensure these laws are applied to both domestic and offshore VASPs.
   • Use a risk-based supervision approach.
2. Identify and Monitor All VASP Operators
   • Actively identify natural/legal persons conducting VASP activities, even those without licenses.
   • Investigate and sanction unregistered or rogue exchanges.
3. Enforce the Travel Rule
   • Operationalize enforcement of the Travel Rule.
   • Take supervisory and legal actions against non-compliant VASPs.
4. Tackle Stablecoin Abuse
   • Monitor the use of stablecoins in illicit finance, especially for layering and cross-border movement.
   • Include stablecoins in the national risk assessment and supervisory framework.
5. Regulate and Supervise DeFi
   • Identify centralized actors behind supposedly decentralized finance (DeFi) platforms.
   • License or regulate DeFi arrangements that meet VASP criteria.
   • Take enforcement actions against DeFi-related abuse.
6. Improve Cross-Border Oversight
   • Strengthen international cooperation and asset recovery, especially for crimes like DPRK-linked thefts.
   • Work with global counterparts to freeze and recover stolen funds.
7. Strengthen Public-Private Collaboration
   • Engage with the private sector to build trust, share data, and respond to emerging threats like scams, hacks, and deepfake-driven fraud.

This article is published on BitPinas: PH Crypto Oversight Improves, But FATF Flags Gaps on DeFi, Stablecoins, Offshore Exchanges

What else is happening in Crypto Philippines and beyond?