Philippines: SEC delays launch of digital asset regulations over concerns on FTX collapse

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The Philippines’ Securities and Exchange Commission (SEC) has announced an extension of its widely anticipated rules for digital currencies to strengthen its provisions on investor protection.

Local news outlet Philstar reports that the securities watchdog pushed back its regulatory framework to comprehensively study the factors leading to FTX’s collapse in late 2022. SEC Chair Emilio Aquino confirmed that the rules could be launched before the end of 2023, hinging on the addition of proper safeguards for investors.

“We were supposed to bring it out late last year, but we don’t want people to get burned,” Aquino stated. “The issuance of digital assets as a form of capital raising, we have to study that because like in FTX they were transferring billions left and right.”

FTX’s ill-fated collapse sent shockwaves through the financial ecosystem, adversely affecting retail and institutional investors. The Philippines received its fair share of the collapse, prompting a heightened regulatory response from the SEC and other financial watchdogs in the country.

Under the incoming rules, virtual asset service providers (VASPs) will be expected to comply with water-tight regulations on issuing and custody of digital currencies. Licensed firms will be required to make necessary disclosures to Filipino regulators, and pundits opine the SEC will exercise greater regulatory control over the industry.

“I’m a believer in digital technology. And when there is a framework, we can allow this. It’s just that we have to ensure investor protection,” Aquino remarked.

To better understand the regulatory process, the SEC inked a deal with the University of the Philippines Law Center (UPLC) to explore the use of technology in the lawmaking process. Both parties stated that the lessons learned from the partnership would benefit the ever-changing ecosystems of virtual currencies and fintech.

In January, draft operational rules to assist the Financial Products and Services Consumer Protection Act were published by the SEC seeking public comments.

Veteran status for the SEC

The Philippines’ SEC has been making a valiant attempt at regulating the digital currency ecosystem from bad actors in the form of public advisories. In 2022, the securities watchdog issued over 80 warnings against firms offering unregistered securities to the public.

The SEC upped its efforts with joint enforcement actions with local authorities to raid the premises of firms in flagrant violations of its warnings. The public advisories have continued well into 2023, with the SEC warning residents to avoid investing in the named entities on the grounds of their non-registration with the Commission.

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