The Securities and Exchange Commission (SEC) of the Philippines has released draft guidelines for initial coin offerings (ICOs) in a bid to keep pace with the number of startups using the scheme to raise funds from the public.
In a statement emailed to reporters, the regulator said the draft rules were formed based on international experience and published for broad public comment before adoption. The Philippines SEC is asking banks, investment funds, the crypto community and other interested parties to submit comments on the proposed rules by August 31.
Under the new rules, initially all tokens issued through ICOs are considered securities unless proven otherwise. The circular itself defines the rules for filing an application no less than 90 days before the start of the ICO. The SEC intends to evaluate ICOs in two stages, namely, initial evaluation and registration.
Initial evaluation will require ICO proponents to prove that the tokens they hold are not securities.
According to the new rules, the commission must complete a preliminary assessment of the ICO within 20 days and determine the status of the coins proposed for placement. If the SEC finds that the proposed ICO tokens qualify as securities, the initiator is required to proceed with registration.
Upon registration, the issuer will be required to provide documents containing the name, address, contact details and a brief description of the issuer's corporate background, the schedule of the ICO campaign and target market, and the risks of participating in the ICO.
The issuer will still need to submit an audit report. The independent audit should include, but is not limited to, the results of testing of source code, technology risks and security protocols.
ICOs are exempt from registration for those with fewer than twenty private investors, or only for large institutional market participants.
The Philippine SEC has consistently delivered on its promise to adopt a regulatory framework made in beginning of the year. This year, the Central Bank of the Philippines recognized Bitcoin as legal tender. In April, the SEC recognized cloud mining contracts as securities.
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