The Securities and Exchange Commission (SEC) has ruled that entities intending to sell or promote the sale of crypto-assets must first register with its office and obtain a license to operate as a crypto-asset service provider (CASP).
In a statement, the SEC said the requirements are intended to regulate the trading of crypto-assets and strike a balance between promoting new securities and technology-based ventures and ensuring market integrity and investor protection.
The SEC said this is also part of its rules for CASPs, released on May 30, which established guidelines for their operations.
It will treat crypto-assets like cryptocurrencies as securities as defined under the Securities Regulation Code (SRC or RA8799), it said.
The SEC defines crypto-asset as “a cryptographically secured digital representation of value or of a right that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions that can be transferred, stored, or traded electronically.”
“Crypto-assets may take the form of financial products, specifically investments, under Republic Act No. 11765, or the Financial Products and Services Consumer Protection Act (FCPA), or as crypto-asset securities which are securities, as defined under the SRC,” the SEC said.
Thus, the SEC said it is “empowered to regulate and supervise the conduct of CASPs by requiring the registration, licensing, and disclosures pertaining to crypto-assets, crypto-asset services, marketing of the aforementioned, and crypto-asset securities pursuant to the CASP Rules.”
The SEC said that, under these rules, crypto-assets and crypto-asset securities may not be sold, offered for sale, or distributed in the country without a disclosure document or registration statement duly filed with and approved by its office.
“Similarly, no person or entity shall engage in the marketing or inducement to purchase crypto-assets or crypto-asset services unless he/she is registered as a corporation and has obtained the necessary licenses from the concerned regulatory agencies, such as the SEC and Bangko Sentral ng Pilipinas (BSP),” it said.
The SEC, however, is making an exception for marketing content that is “made in good faith and purely for educational purposes.”
However, the offering of crypto-assets will require disclosure of documents filed with the SEC and published on the issuer’s website, social media account, and other means of communication, “not less than 30 days before any marketing activities or the actual offering is conducted, the SEC said.
The document must include information about the issuer and offeror of the crypto-asset, as well as key features, risks, and prospects of the crypto-asset. Additionally, it must outline the underlying technology, among other details, it said.
Initial coin offerings (ICOs) or the introductory sale of a cryptocurrency will also be treated as a sale of securities under the SRC and other relevant laws.
“CASPs shall be considered as covered persons under the Anti-Money Laundering Act and are therefore subject to the supervision and monitoring of the SEC and the Anti-Money Laundering Council for anti-money laundering/countering the financing of terrorism/counter-proliferation financing,” the SEC said.
The SEC stated that CASP, when applying for registration with its office, must have a minimum paid-up capital of P100 million in cash or property, excluding crypto-assets.
They must also have a physical office that is appropriately staffed or manned during regular business hours.
“An initial filing fee of P50,000 shall accompany registration applications. CASPs shall then pay the SEC a supervision fee based on their gross revenue during the preceding year, for the privilege of doing business,” it said.
“Upon registration, a CASP must maintain an operational report that includes the total number of active users and daily trading summaries, which shall include the number of trades, crypto-assets traded, and total settlement value, among others,” the SEC added.
Entities violating the CASP rules, the SRC, the FCPA, or other related rules issued by its office may be punished with imprisonment of one to five years or a fine of P50,000 to P10 million, it warned.
