The Central Bank Draws a Line
The Bangko Sentral ng Pilipinas has issued its most significant regulatory guidance on artificial intelligence to date. Through Memorandum No. M-2026-031 dated June 24, 2026, the central bank introduced “Governance Principles for Artificial Intelligence in Financial Services,” providing BSP-supervised financial institutions with a framework for developing their own AI governance and risk management policies. The guidance is anchored on five key principles summarized by the acronym STARS: sustainability, transparency, accountability, responsibility, and security. Deputy Governor Lyn I. Javier framed the framework as a balancing act: “AI is spreading across BSFI operations and STARS provides them with principles that can help them innovate while mitigating unintended consequences from the use of the technology”.
What the STARS Framework Actually Requires
The memorandum applies to all BSP-supervised financial institutions, with implementation proportional to the nature, extent, scale, complexity, and materiality of their AI systems. It also covers outsourced service providers supporting AI-related activities under a shared responsibility model. While the principles are voluntary and non-binding, they reflect the BSP’s minimum supervisory expectations for AI adoption, and BSFIs are encouraged to integrate them into governance frameworks, risk management strategies, and operational processes. The framework aligns with guidelines developed by the OECD, ASEAN, and the Financial Stability Institute, positioning the Philippines within global regulatory norms.
The Dark Side of AI Investing: Enforcement in Action
Just as the BSP moves to legitimize AI in finance, the Securities and Exchange Commission has demonstrated the risks of unregulated AI investment schemes. In September 2026, the SEC issued a cease and desist order against AIQuest Trading, which allegedly solicited investments through social media for what it described as “AI-assisted stock trading.” The platform promised guaranteed returns ranging from 30 percent within seven days to as much as 150 percent within 30 days, with investments ranging from ₱500 to ₱1 million. The SEC found that AIQuest Trading was not registered as a corporation or partnership, had not registered any securities, and had not applied for a license to sell securities. The regulator determined that the scheme constituted the offer and sale of unregistered securities in the form of an “investment contract” under the Howey test, and further found that it constituted financial fraud under the Financial Products and Services Consumer Protection Act.
Why This Matters for Everyday Investors
The juxtaposition of the BSP’s STARS framework and the SEC’s enforcement action tells a clear story: AI is no longer a fringe concept in Philippine finance, but its integration requires guardrails. For retail investors, the practical implications are twofold. First, legitimate AI-powered tools—such as GCash’s Pera Coach or BPI Wealth’s AI-themed funds—operate under regulatory oversight and provide transparent, risk-disclosed products. Second, any platform promising guaranteed returns through “AI trading” should be treated with extreme skepticism. The SEC’s advisory against Tagalogix AI Ltd., another entity holding itself out as an “AI-powered” trading platform, reinforces that scammers are exploiting the AI narrative to target Filipino investors.
Building Trust Through Transparency
The BSP’s STARS principles are designed to do more than regulate—they aim to build trust. By requiring transparency and accountability in AI systems, the framework gives investors confidence that the algorithms managing their money are not black boxes. For financial institutions, the guidance is an opportunity to differentiate themselves in a crowded market: those that adopt robust AI governance early will attract investors who value safety alongside innovation. As AI becomes embedded in everything from robo-advisory to fraud detection, the institutions that treat governance as a competitive advantage rather than a compliance burden will be the ones that earn lasting trust.
