The Philippines Security and Exchange Commission, (SEC) approved new draft rules for initial coin offering. According to reports, the new rules will provide a legal platform for traders to sell their cryptocurrencies.
SEC Chairman Emilio Aquino released the new draft rules on August 2 in Malina. During the announcement, he stated that the government is working to create the new regulations to facilitate the sale of tokens and ICOs in the country. The draft laws are outlined in 12 key points.
Firstly, under the new draft rules, all tokens issued by startups or company should be registered with the Commission. Any entities embarking on ICOs will not be allowed to conduct its operations without having registered with SEC. The companies will also be required to follow the set requirements under section 3.1 of the Securities Regulation Code. Companies and startups will also be required to disclose the necessary information needed to protect the investors and other relevant parties.
Secondly, all tokens will be presumed as securities and will be subjected under SEC’s authority. According to Aquino, most of the white papers issued by ICOs state that their tokens are not securities and thus not subjected to regulations set out by SEC. By following this line of thought, many investors have invested in various ICOs, which after a few months of operations end up as scams. To avoid these uncertainties, authorities have placed the burden of proof on all companies or startups who claim their tokens are not securities. The companies will be required to provide documentation supporting their argument. Once the company has issued all the relevant documentation, SEC has 20 days to decide whether or not the ICO is a security. Reports indicate that this new line of thinking was borrowed from various jurisdictions and markets.
In the draft rules, foreign startups conducting an ICO of a security token in the country will be required to maintain a branch office in the country. Another key feature of the draft laws is that the issuer of a security token ICO will be required to keep the proceeds under escrow with a reputable independent escrow agent. According to reports, the issuer of the ICO will not be allowed to access the proceeds without providing a work progress report.
The Philippines government has taken a positive stand on cryptocurrency activities in the country. In April, the government established a blockchain and fintech Hub in the Cagayan Economic Zone Authority (CEZA). Hoping to create a “Silicon Valley” in the country the government has allowed ten blockchain and cryptocurrency companies to set up in the region.