SEC to release initial coin offerings rules soon

MANILA, Philippines — The Securities and Exchange Commission (SEC) hopes to release its rules on initial coin offerings (ICOs) before the end of the year.

In a chance interview, SEC chairperson Emilio Aquino said the proposed rules have been released to the public for comments and may be finalized before the end of the year.

The rules are intended to regulate and protect investors.

Asked why the Philippine SEC has decided to just regulate ICOs instead of imposing a total ban like what China did, Aquino said technology has its benefits.

What is important, he said, is that investors should be guided and protected so they know what they are getting into.

Under the draft rules, the SEC said the tokens issued by the startups or companies conducting the ICO may follow the nature of a security under section 3.1 of the Securities Regulation Code.

“Therefore, these should be registered with the commission and necessary disclosures need to be made for the protection of the investing public,” it said.

Nevertheless, the SEC said despite being analogous to securities, the present registration process for initial public offerings may not be tailor fit for ICOs.

Thus, the SEC proposed separate rules for the registration of security tokens.

According to the rules, all ICOs conducted within the Philippines or by Philippine startups or corporations shall be required to undergo an initial assessment by submitting documents including the proposed White Paper.

“The issuers of the security tokens are required to submit, among the other documents, as exhibits to the registration statement a code audit report issued by an independent code auditor, including but not limited to testing of the source code, know your customer and anti money laundering framework, technology risks and security protocols.

Regular code audit reports shall also be required for monitoring of the project, in addition to other continuing reports specified under the proposed rules,” the SEC said.

The issuer of a security token ICO is required to keep the proceeds under escrow with a reputable independent escrow agent.