The Securities and Exchange Commission (SEC) of the Philippines has introduced a comprehensive draft of the "Rules on Crypto-Asset Service Providers" (CASP), aiming to create a structured regulatory environment for businesses operating in the cryptocurrency sector. This initiative underscores the growing need for clear guidelines to protect investors and ensure market integrity.
Stakeholders and interested parties are encouraged to review the proposal and submit feedback before January 18, 2025. The draft covers registration, compliance, trading rules, and enforcement mechanisms applicable to all entities offering crypto-related services within or impacting the Philippine market.
Scope and Application of the Rules
The proposed regulations apply to any entity providing crypto-asset services in the Philippines, including those operating internationally that affect local markets. The framework acknowledges the roles of other regulatory bodies, such as the Bangko Sentral ng Pilipinas (BSP), particularly when activities overlap with existing financial regulations. These rules are designed to complement, not conflict with, broader financial laws.
Registration and Licensing Requirements
All Crypto-Asset Service Providers must obtain a license from the SEC before commencing operations. Key prerequisites include:
- Incorporation as a stock corporation within the Philippines.
- A minimum of four locally based staff members.
- Compliance with capital requirements specified by the SEC.
Applicants must demonstrate the capacity to meet ongoing regulatory obligations. The SEC retains the authority to modify requirements and impose a moratorium on new licenses as needed.
Public Offerings of Crypto-Assets
Entities planning public offerings must adhere to strict disclosure standards. Required information includes:
- Detailed profiles of the issuer and the crypto-asset.
- Comprehensive risk factors and obligations associated with the asset.
- Technical specifications of the underlying blockchain or protocol.
Mandatory warnings must highlight:
- The potential for complete loss of value.
- Possible illiquidity or transfer restrictions.
Exemptions apply to:
- Free distributions, such as airdrops.
- Rewards for blockchain maintenance or validation activities.
- Tokens used exclusively within closed merchant networks.
Public Offerings of Crypto-Asset Securities
Crypto assets classified as securities under the Securities Regulation Code (SRC) must undergo a formal registration process with the SEC. This includes Initial Coin Offerings (ICOs) that function as securities. Issuers are required to file a registration statement and secure approval before proceeding.
Admission to Trading on Exchanges
Crypto exchanges and trading platforms must comply with the aforementioned offering rules. Additionally, CASPs are prohibited from:
- Supporting assets linked to gambling or anonymity-enhanced features.
- Offering derivatives, margin trading, or futures contracts without explicit SEC authorization.
The SEC holds the power to order the removal of a crypto-asset from an exchange to safeguard investor interests.
Marketing and Promotion Guidelines
Marketing activities—encompassing social media, events, paid media, and educational content—must be conducted responsibly. Unauthorized entities are barred from promoting crypto-assets. All promotional materials must:
- Use clear and straightforward language.
- Accurately disclose risks without misleading claims.
Crypto Asset Service Providers are held accountable for ensuring that their agents and third-party marketers comply with these guidelines.
Anti-Money Laundering (AML) Compliance
CASPs are designated as "covered persons" under the Anti-Money Laundering Act (AMLA). They must adhere to AML, Counter-Terrorism Financing (CFT), and Counter-Proliferation Financing (CPF) regulations. This includes implementing robust monitoring and reporting systems to detect suspicious activities.
Ongoing Obligations for CASPs
Licensed providers must:
- Maintain systems to detect and report market abuse.
- Implement advanced surveillance and cybersecurity measures.
- Conduct annual reviews of system effectiveness, particularly after launching new services or features.
Prohibited Market Activities
The rules explicitly ban market manipulation, insider trading, and unlawful disclosure of information. Prohibited practices include:
- Artificially inflating or deflating prices through tactics like wash trading.
- Using material non-public information for trading advantages.
CASPs must maintain insider lists and ensure employees do not misuse confidential data.
Cybersecurity Requirements
Providers must adopt cybersecurity frameworks aligned with the National Cybersecurity Plan and international best practices. Compliance with SEC-issued cybersecurity guidelines is mandatory to protect against threats and vulnerabilities.
Audit and Review Procedures
The SEC will conduct regular audits to assess CASP compliance with regulatory rules, cybersecurity measures, and risk management systems. These audits help ensure ongoing adherence to standards and identify areas for improvement.
Enforcement Powers of the SEC
The Commission is empowered to:
- Investigate violations and impose fines or suspensions.
- Issue cease-and-desist orders against fraudulent or harmful practices.
- Revoke licenses following due process for persistent non-compliance.
Investigations remain confidential until formal actions are initiated.
Grounds for License Suspension or Revocation
Licenses may be suspended or revoked due to:
- Misrepresentation or false statements in applications or disclosures.
- Failure to comply with regulatory rules or address violations.
- Engagement in fraudulent or unauthorized activities.
The SEC outlined a formal process for suspension or revocation, including hearings. Initial suspensions are confidential unless violations continue.
Liability and Administrative Sanctions
CASPs are liable for misconduct by their employees and agents. Penalties include:
- Fines ranging from ₱50,000 to ₱10 million, with additional penalties for ongoing violations.
- Settlement offers may be accepted if they serve the public interest.
Penalties and Legal Applicability
Violations may result in:
- Imprisonment for 1–5 years.
- Fines between ₱50,000 and ₱2 million.
- Both penalties for individuals and responsible corporate officers.
These rules supplement the SRC, FCPA, and other relevant regulations. If any provision is invalidated, the remainder of the rules continue to apply.
Next Steps and Stakeholder Feedback
The SEC is soliciting comments from stakeholders until January 18, 2025. Feedback can be submitted via email to [email protected] or through physical mail to their Makati office. This collaborative approach aims to refine the framework before finalization.
👉 Explore detailed regulatory guidelines
Frequently Asked Questions
What is the purpose of the SEC draft rules for CASPs?
The draft rules aim to establish a clear regulatory framework for crypto asset service providers in the Philippines. They focus on investor protection, market integrity, and compliance with financial laws, including AML and cybersecurity requirements.
Who needs to comply with these regulations?
Any entity offering crypto-asset services in the Philippines or impacting its markets must comply. This includes exchanges, issuers, and marketers involved in crypto-related activities.
What are the key registration requirements for CASPs?
Applicants must incorporate as a stock corporation in the Philippines, employ at least four local staff, and meet capital requirements set by the SEC. They must also demonstrate the ability to fulfill ongoing regulatory obligations.
Are there exemptions for public offerings of crypto-assets?
Yes, exemptions apply to free distributions like airdrops, rewards for blockchain maintenance, and tokens used within closed merchant networks. These are not subject to the same disclosure requirements as public offerings.
What penalties can violators face?
Violations may result in fines ranging from ₱50,000 to ₱10 million, imprisonment for 1–5 years, or both. The SEC can also suspend or revoke licenses for serious or repeated offenses.
How can stakeholders provide feedback on the draft rules?
Stakeholders can submit comments via email to [email protected] or by mail to the SEC's Makati office until January 18, 2025. Feedback will be considered in finalizing the regulations.