THE Securities and Exchange Commission (SEC) said it needs to come up with relevant regulation on the cryptocurrency as investment security, but admitted it needs more time in drafting one.
SEC Commissioner Emilio B. Aquino said the current Securities and Regulation Code (SRC) can accept new rulings for the cryptocurrency. Aquino added the agency needs a specific one, especially after companies led by Joseph H. Calata has engaged in an initial coin offering or ICO.
“It [cryptocurrency] does fall under an investment contract, which is an investment security. Ergo, they need to comply with the SRC,” Aquino said, referring to the ICO of Calata.
He said, however, that many countries do not have regulation involving the use of virtual currency. Aquino stopped short of saying that the use of the said form of virtual money is a “scam” or an “illegal act.”
“We are also allowed under the SRC to come up with sense of regulation. And since ICOs are a type of IPO [initial public offering], we told them that it must be based on the facts and circumstances—they qualify as securities, in which case they have to be registered with us,” he said. “Our regulation is not sweeping.”
Last week the SEC released a cease-and-desist order against Calata-led firms Black Cell Technology Inc., Black Sands Capital Inc., Black Cell Technology Ltd. and Krops from selling and offering for sale KROPS tokens and Krops coins or any others of the same nature.
An ICO is the first sale and issuance of a new virtual currency to the public usually for the purpose of raising capital for start-up companies or funding independent projects.
In an ICO campaign, a percentage of the total available virtual currency is sold to interested buyers in exchange for either a fiat currency, another virtual currency or another asset or security.
“The securities regulator also warned that administrative and criminal actions will be instituted against persons or entities who act as solicitors, information providers, salesmen, agents, brokers, dealers in behalf of the mentioned companies,” the SEC said in its ruling.
The order said the companies are either owned, headed or associated with Joseph Calata, also chairman, president and CEO of Calata Corp., which was delisted from the Philippine Stock Exchange for securities violations.
Aquino said Calata already wrote them on the said order but he advised him to stop the ICO first and then talk to the regulators on their further steps.
“They should stop first what they are doing,” Aquino said. “But if they continue on with the sale, we can cite them for contempt.”
He added other companies also approached the agency for a possible ICO, but they were told the SEC is not ready to do such kind of offering.
Local regulators, however, did not issue an outright ban on the use of cryptocurrency. The Bangko Sentral ng Pilipinas last year has issued a circular allowing the use of virtual currency, but only for money transfers. The Philippines is one of the world’s largest remittance-receiving nations, only after India and China.
Some analysts claim that the use of cryptocurrency as a remittance tool can cut the cost of sending money to just 2 percent to 3 percent of the total transferred cash from the current 10 percent.