SEC sets ICO rules

The Securities and Exchange Commission (SEC) released its proposed rules on initial coin offerings (ICO), a move highly anticipated by the Philippine blockchain community.

Under the draft rules, the SEC said the tokens issued by the startups or companies conducting the ICO may follow the nature of a security under Section 3.1 of the Securities Regulation Code.

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

Nevertheless, the SEC said despite being analogous to securities, the present registration process for initial public offerings may not be tailor fit for ICO.

Thus, the SEC proposed separate rules for the registration of security tokens.

According to the rules, all ICO conducted within the Philippines or by Philippine startups or corporations shall be required to undergo an initial assessment by submission of documents including the proposed whitepaper.

The SEC shall have 20 days to do its initial assessment and determine whether the tokens are security tokens or not.

“If it 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 before the start of the pre-sale,” the SEC said.

Furthermore, startups that will conduct ICO of security tokens shall be required to incorporate and in the case of foreign corporations, will be required to maintain a branch office in the Philippines.