Philippine securities regulator ‘not yet ready’ to clarify rules on ICOs

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The securities regulator of the Philippines has decided to defer the promised publication of official rules around initial coin offerings (ICOs), as it aims to buy more time to consult with stakeholders.

In a blow to those promoting ICOs in the country, the Securities and Exchange Commission (SEC) had been hoping to release the rules at the end of 2018, which would have clarified how ICOs could be used in a legally compliant way, the Philippine Star reported.

Without final rules, promoters of ICOs run the very real risk of contravening securities laws, which in most cases carry criminal sanctions for non-compliant companies and their officers.

Instead, the existing proposed rules have been completely updated yet again, and are currently open for public comment.

Among the latest set of proposals is a requirement for ICO issuing firms to be registered with the SEC at least 45 days prior to the pre-sale date, as well as permitting ICOs that adhere to the guidelines set out in Section 3.1 of the Securities Regulation Code.

According to the draft rules, “Therefore, these should be registered with the Commission and necessary disclosures need to be made for the protection of the investing public.”

All members of companies promoting ICOs are required to disclose resumes, as well as police and criminal records checks, bankruptcy details and membership to self-regulating organizations.

A whitepaper will also become a requirement for listing, along with a project description and an outline of the “problem it hopes to solve,” suggesting a requirement for utility beyond merely raising capital for the promoters.

While there are de minimis exemptions for private ICOs to close groups of fewer than 20 investors, as well as exemptions for banks and financial services institutions in some circumstances, the rules propose a wide berth of regulation.

While the rules would be expected to raise the standard of ICOs and decrease levels of fraud, currently rampant, within the space, they would nevertheless prove challenging for many ICO promoters to overcome.

The SEC described the proposals as beneficial to investors, in preventing them falling victim to the harms of rogue ICOs. Having considered an outright ban, the regulator chose instead to opt for regulation, in order to foster the wider benefits of blockchain technology.

It remains to be seen whether the current rules will be the final draft, but for the time being, it looks like uncertainty continues to rule supreme for ICOs and unsuspecting investors in the Philippines.