It seems financial world has admitted cryptocurrencies as an evitable repercussion of the nascent technological revolution and, instead of fiercely denying its existence, finally moved to the elaboration of a regulatory framework facilitating cryptocurrency implementation into real sector.
The regulatory move comes as various countries worldwide are either developing legal frameworks to govern ICOs or are issuing guidelines on how to avoid falling foul of securities rules.
Following the pace of its neighbor Thailand that recently launched a legal registration process allowing ICO projects to fundraise, Philippines is going to be the next Asia tiger to set new rules governing token sales.
On Thursday the Philippine Security and Exchange Commission (SEC) has released a 37-page memorandum outlining its proposed rules for local ICOs. Notably all token distributed through the process of initial coin offering are deemed as securities unless the issuer proves it is wrong.
The amendment immediately became the reason for overwhelming public complains, yet the SEC stands still saying the cumbersome verification process underlying ICO registration will scare off scammers willing to take advantage on unexperienced investors.
In the statement, the Philippine financial watchdog emphasized:
“Allowing various ICOs conducted in the Philippines to claim that their tokens are not securities is proven 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.”
According to the memorandum, any entities planning to conduct initial coin offerings must file applications to the SEC and include detailed documents revealing the credibility of operations and tokens functionality. As a rule, only tokens classified as a security token are to be registered with the SEC but the agency may decide that other kinds of tokens such as asset, utility or payments tokens are also security tokens based on their characteristics.
Additionally, all ICO team members and advisors are also required to submit themselves to NBI and police clearances as proof of “good repute.” They are also required to submit a whitepaper containing a system architecture, pay the application fees, and submit an assessment by an independent legal counsel attesting that the tokens do not qualify as securities.
The collected information is what the SEC will use to write a report stating whether a company’s cryptocurrency needs to be registered with the regulatory body. All Philippines companies wishing to raise fund by conducting a token sale have to submit their application to the SEC no later than 90 day before the start of the pre-sale period.
Further, the SEC noted that even in case issued tokens would be considered as securities, ICO holders are allowed to hold on their projects as long as they operate in compliance with the proposed rules resulting into a regulatory approval obtained ahead of a trading launch.
The draft rules end several months of speculation regarding the SEC’s position on ICOs, which have gained traction in the Philippines over the past year. In the circular’s preamble, the SEC recognizes that ICOs “will help raise capital and resources for small and local businesses” and that they “will provide alternative investment opportunities for the investing public.”