The Securities and Exchange Commission of Philippines had been expected to issue the ICO regulations by the end of last year but this has now been postponed to an unconfirmed date. The deferment came after various stakeholders requested more time to enable them to familiarize themselves with the draft ICO regulations. Public comments will continue to be received by the regulator till mid this month.
The draft rules were initially released by the Securities and Exchange Commission last year in August. This has been signaled more than seven months earlier by the regulator, as CCN reported at the beginning of 2018.
At the time, the commissioner of the SEC, Emilio Aquino, indicated that the rules were being drafted with a view of protecting investors from fraud while ensuring that they don’t hamper innovation.
Among other requirements, the draft rules require that firms conducting initial coin offerings must register with the SEC before the commencement of the pre-sale. Additionally, the draft rules require all ICOs conducted by Philippine firms or within the country to be assessed by the SEC with a view of determining whether they are security tokens:
If it [the SEC] finds that the tokens are indeed security tokens, and unless the ICO falls under the exemptions from registration provided under the rules or conducted exclusively through crowdfunding portals under the proposed rules for crowdfunding, the issuer must register the security tokens (registration proper) before the start of the pre-sale.
The draft rules also require Filipino firms conducting ICOs to incorporate while foreign companies must maintain a branch office in the Southeast Asian country.
With the SEC’s draft rules aimed at protecting investors, the regulator also intends to ensure that proceeds from an initial coin offering are kept with an independent escrow agent. According to the SEC, the Escrow Agreement should ensure that withdrawal of the ICO proceeds only happens upon the fulfillment of two conditions:
…(1) that the said proceeds shall be withdrawn only upon the presentation of the Issuer’s work progress report, and (2) that the Escrow Agent will return the said proceeds to the investors in case the soft cap of the project is not reached or in a pro rata basis in case the project is abandoned by the issuer before completion.
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