SEC readies rules on crypto-assets service providers

MANILA, Philippines — The Securities and Exchange Commission (SEC) has issued its draft guidelines that will govern the conduct of crypto-assets service providers in the country.

The SEC said the rules would enhance the oversight and supervision powers of the commission over businesses that involve the offering, trading and other activities of these innovative financial products.

Further, it said the guidelines offer a certain degree of protection for investors who have the appetite to invest in highly volatile financial products.

The rules will apply to all service providers that are offering crypto-asset services in the Philippines.

“The continued growth and development of new crypto-asset markets, services and business models relies on clear, proportionate and robust regulatory frameworks, which can ensure that markets are fair, efficient and transparent. Financial consumers and investors rely on trustworthy intermediaries to transact with,” the SEC said.

According to the commission, this necessitates due regard for financial and operational resilience, transparency for consumers over applicable risks, redress for complaints as well as measures to ensure proactive management of specific risks and characteristics of digital platforms and crypto-asset technology.

“In alignment with international standards, the SEC is establishing an affirmative legal framework to provide protection against consumer harms and systemic risks and to afford consumers the choice of engaging in crypto-asset activity with licensed and authorized intermediaries,” it said.

Under the draft rules, the SEC said that a crypto-asset service is deemed conducted or carried on in the country when such service is provided in or to the Philippines or is capable of having an effect in the Philippines.

It states that no person shall provide crypto-asset services in the country unless the person acquires the necessary license in relation to the relevant activity.

An applicant for crypto-asset service provider registration must be a stock corporation registered with the SEC and must have at least four staff members who reside in the Philippines.

It must also meet the minimum capital requirements provided in the guidelines, which is set by the SEC at the time of application.

Further, the rules indicate that crypto-assets should not be sold, offered for sale or distributed in the Philippines without complying with the guidelines.

The Securities Regulation Code mandates the SEC to encourage competitiveness in the market by promulgating rules for the registration and licensing of innovative and other trading markets or exchanges, including the issuance and trading of innovative securities and technology-based ventures.

The commission is requesting all interested parties to submit their comments on the draft proposal on the issuance of the rules on crypto-assets service providers not later than Jan. 18, 2025.