BSP upholds halt order vs LYKA as Operator of Payment System

The Bangko Sentral ng Pilipinas (BSP) on Friday said it upheld its cease-and-desist order against social media platform LYKA, halting its operations as an Operator of Payment System (OPS).

This, as the central bank denied the request of Digital Spring Marketing and Advertising Inc. - the marketing arm of LYKA in the Philippines - to be registered as an OPS of the LYKA/Things I Like Company Ltd (TIL) Payment System.

The BSP said it upheld the cease-and-desist order issued in July reiterating that LYKA/TIL and not Digital Spring should register as OPS with the BSP. 

The central bank said it transmitted a letter to Digital Spring denying its requests for reconsideration on Friday, October 8, 2021.

“Think of an OPS as a pilot who must personally obtain a flying license to prove that they possess the necessary skills and training to safely operate a passenger aircraft,” BSP Deputy Governor Mert Tangonan said.

“Digital Spring applying for registration, instead of LYKA/TIL itself, is like saying the airline ticketing office can apply for a flying license on behalf of the pilot. It is the pilot who must apply for the license”, he added.

To date, the BSP said LYKA/TIL has yet to register as an OPS.

The central bank noted that LYKA/TIL allows its users to purchase, exchange, and use Gift cards in Electronic Mode or GEMs as payment for goods and services.

These activities make LYKA/TIL an OPS and, therefore, its registration is required before it can continue with these activities, the BSP said.

An OPS may be cash-in service providers, bills payment service providers, and entities such as payment gateways and merchant acquirers that enable sellers of goods and services to accept payments, in cash or digital form.

Under Circular No. 1049, OPS that are required to register but are found to be operating without registration shall be directed to comply with the Circular’s registration requirements.

Those that fail to comply may be ordered to stop operations until immediate action is taken to register with the BSP.

This is without prejudice to other enforcement actions that may be taken against the OPS and its directors/officers and/or employees based on the BSP’s authority over payment systems under RA No. 7653, as amended or The New Central Bank Act and the NPSA.

“For its continuous protection, the public is reminded to only use the payment services of a registered OPS,” the BSP said.

The LYKA management meanwhile said that they respected the findings of the BSP.

"In line with this development, LYKA Global shall register as an OPS as directed by the BSP and will immediately put up its own office in the [Philippines]," LYKA said in a statement.

The social media platform went on to say that while it was unfortunate that the company would have to end its partnership with Digital Spring, all contracts entered into by their local partner would be transferred to the new company, and all obligations and signed agreements would be honored.

As part of their effort to open a Philippine office, LYKA had commenced sourcing for a country head and the best support team for an internal Philippine arm. — DVM, GMA News