THE Securities and Exchange Commission (SEC) plans to require the registration of cryptocurrency asset service providers to spice up investor protection.
Under draft rules issued on Dec. 20, applicants should be a SEC-registered stock corporation, have a minimum of 4 staff members living within the Philippines and meet the minimum capital requirements.
The company regulator also proposed that crypto asset securities must not be sold without an approved registration statement.
“The SEC shall have the facility to order the removal of a crypto asset in a crypto asset exchange within the interest of investor protection,” in keeping with the draft rules.
“Unless allowed by the commission, crypto asset service providers shouldn’t conduct any offering, trading, or dealing activities of futures contracts or related derivatives involving crypto assets, in addition to offer margin trading,” it added.
The SEC defines a crypto asset as a “cryptographically secured digital representation of a price or right that relies on a cryptographically secured distributed ledger or an analogous technology to validate and secure transactions that could be transferred, stored, or traded electronically.”
“The Philippines is experiencing a widespread adoption of crypto assets,” the SEC said. “In line with various studies, the Philippines ranks high in cryptocurrency adoption compared with other jurisdictions. This latest class of assets has various characteristics and use cases, certainly one of which is as an investment product.”
Under the SEC draft rules, service providers must have the option to forestall and detect market abuse. The foundations prohibit market manipulation, insider trading and disclosure of fabric and nonpublic information.
The draft rules also empower the SEC to stop illegal acts of service providers and revoke their licenses.
“In alignment with international standards, the SEC is establishing an affirmative legal framework to supply protection against consumer harms and systemic risks and to afford consumers the alternative of engaging in crypto asset activity with licensed and authorized intermediaries,” the SEC said.
“The continued growth and development of recent crypto-asset markets, services and business models depend on clear, proportionate and robust regulatory frameworks, which may be sure that markets are fair, efficient, and transparent,” it added.
Service providers must adopt a cybersecurity framework consistent with probably the most recent iteration of the federal government’s national cybersecurity plan and other global best practices. They will even be subject to audit and review.
“Consistent with the objectives of the Philippine Development Plan 2023-2028, rapid technological advancements and evolving market needs have spurred the event and adoption of modern financial services,” the SEC said.
The Securities Regulation Code mandates the company regulator to encourage market competitiveness by enforcing licensing and registration rules of other trading markets including “modern securities and technology-based ventures.”
The Financial Products and Services Consumer Protection Act also empowers the SEC to formulate rules and standards for specific financial services or products.
In April, the SEC requested the removal of Binance from the app markets of Apple and Google within the Philippines for operating within the country and not using a license.
Binance claims to be the biggest cryptocurrency exchange when it comes to trading volume.
A survey by blockchain software company Consensys earlier this month showed that 96% of Filipino respondents said they were accustomed to cryptocurrencies.
Nonetheless, only 46% said they fully understood how cryptocurrencies work. The survey talked to 18,000 people aged 18-65 in 18 countries, including the Philippines.
Comments on the draft rules could also be submitted until Jan. 18, 2025, the SEC said. — Revin Mikhael D. Ochave
