On August 2, the Securities and Exchange Commission (SEC) in the Philippines issued a draft outlining new proposed regulations for companies conducting initial coin offerings (ICOs).
The new draft rules contain standards that require any company in the country wishing to issue an ICO to first submit an initial assessment request to the SEC 90 days before the commencement of the coin sale. Following the registration of said coins as securities, the issuer must register the ICO not later than 45 days prior to the coin offering. In this assessment request, the would-be issuer must explain its project in detail and provide evidence that the company is in compliance with stipulations laid out in the draft. The document describes rules concerning advertising, qualifications of issuers and advisors, and the content and accessibility of the company's white paper.
Perhaps more interestingly, the Philippine SEC is looking to define all tokens as securities by default. This viewpoint is clearly stated in a summary of the rules published alongside the draft. However, neither the draft nor the summary include any information regarding what would qualify a token or coin to be exempt from designation as a security.
The commission justifies the move by explaining that the SEC's inability to regulate ICOs as securities is "dangerous to the investing public who are left with no clear recourse once the said ICOs are proven to be scams. Therefore, the SEC will put the burden of proving that the tokens issued through an ICO in the hands of the proponents by presuming that the tokens are securities unless proven otherwise."
The draft also states exemptions to the requirement that security tokens be registered with the SEC prior to an ICO. The draft states that under certain specified circumstances, "an issuer may offer or sell security tokens without the need for registering said securities." Exemptions include companies issuing an ICO to fewer than 20 people and companies limiting their offering to banks, investment houses, or insurance companies.
These proposed regulations are just one step in a long journey of crypto regulation in the Philippines. In February 2017, ETHNews reported that the Philippine Central Bank had established regulations for crypto exchanges. In November of the same year, the Philippine SEC acknowledged it was considering classifying certain tokens as securities. In April 2018, the country's SEC declared that crypto cloud mining contracts are securities.
An earlier version of this article inaccurately stated that the SEC's proposed rules dictate coin issuers must register coins as security tokens 45 days prior to commencement of an ICO.