In response to the sudden growth of ICOs in the year 2017, with many people that have been drawn to its popularity and resulted to, in most cases, being scammed and washed out investments, the Security and Exchange Commission (SEC) has released a draft ICO regulations on Aug 2 for public comment until Aug 31.
Since early 2017, the government has been vigilant in this space to protect Filipinos from the grey areas of ICOs and cryptocurrencies. The Bangko Sentral ng Pilipinas (BSP) has advised the public to exercise caution when dealing with cryptocurrencies and released of Circular No. 944, a formal regulatory approach to virtual currency exchanges within the country.
In the same manner, in January 2018 SEC issued a cease and desist order to the ICO of Joseph Calata’s Kropcoin which was cited to be an illegal activity in the Philippines at that time.
“What is involved here is an ICO, which is essentially the same as a public offering of securities. A public offering of securities is subject to strict disclosure rules, which include the disclosure of pending cases against the founder/offeror/promoter, which would put the investing public on guard,” SEC commented in Inquirer report.
Following the incident, SEC has released a statement that it will draft rules for regulating ICOs and crowdfunding.
“We want to come up with our own set of regulations. You have to be extra careful how investors in this new space are protected,” SEC Commissioner Emilio Aquino reportedly said to Reuters.
The proposed regulation covers initial assessment request and registration proper. SEC presumes that all ICOs are security tokens unless proven otherwise. This means that all ICOs conducted within the Philippines by Philippine startups or corporations will be required to undergo an initial assessment by submitting an initial assessment request, in which SEC will have 20 days to conclude the classification of the token.
During the early stages of the ICO boom, companies, both local and abroad, preferred to classify their token as a utility token to steer clear from possible regulations. And having a concrete government policy, companies will now be obliged to go through SEC for token classification before moving forward. Likewise, being guided by these policies will lessen the legal liabilities of the companies embarking in an ICO.
The draft regulation sparks discussions in the social media amongst keen members of the blockchain community. Atty. Rafael Padilla, head of legal compliance at SCI Ventures, suggested using the term “crypto asset” instead of “virtual currency”. Nonetheless, it’s a good policy as far as he is concerned.
“If I’m grading the PH SEC on their v1 draft ICO regulation, I’ll give them B+. After further polishing, I’ll give them A-. If they use a different the term than “virtual currency” and perhaps replace this with “cryptoasset”, the term being used even by other regulators globally, will probably give them A+,” Atty. Padilla told BitChikka.
With this proposed regulation, the government appears to be active and open in carving the landscape of this industry. While having a formal regulation will require companies that are planning to raise funds via ICOs to go through a stricter and a more thorough process, this move will undoubtedly prevent people from investing their money in ICO scams and cryptocurrency ponzi schemes.