The Philippines Securities and Exchange Commission (SEC) is set to introduce the Digital Asset Security Service Provider Rules either by the end of this year or the first quarter of 2024. This announcement was made during a recent BitPinas interview with SEC Commissioner Kelvin Lee at the YGG Web3 Games Summit.
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Digital Asset Security Service Provider Rules
The upcoming regulations are part of the SEC’s broader initiative to provide a robust legal framework for digital assets in the Philippines.
Commissioner Lee elaborated on the purpose and scope of the new rules:
- It will be different from the Virtual Asset Service Provider (VASP) rules of the Bangko Sentral ng Pilipinas (BSP) which currently governs the licensing regime of companies with crypto to fiat businesses and vice versa.
- The Digital Asset Security Service Provider Rules will focus on digital assets that can be considered securities.
“So we will determine which of these cryptocurrencies operate and act as a security, and thus that would then have to come to us and have to register. So that set of rules it’s on my desk now, actually a couple of hundred pages. It’s very thick because we’re trying to be very specific about it, because we don’t want something like FTX happening here.”Kelvin Lee, Commissioner, SEC
Difference with the BSP VASP License
It’s important to highlight that the proposed Digital Asset Security Service Provider Rules are different from the Virtual Asset Service Provider Rules (VASP) by the Bangko Sentral ng Pilipinas (BSP).
- As gleaned from the interview excerpts provided, the SEC’s rules are primarily aimed at regulating cryptocurrencies, focusing on their broader usage and ecosystem.
- In contrast, the BSP’s VASP license is primarily concerned with overseeing the conversion between cryptocurrencies and fiat currencies, serving as a regulatory framework for these specific financial transactions in the Philippines.
- Read: List of Licensed Virtual Currency Exchanges in the Philippines
Avoiding an FTX situation
“That has been a bad experience so we might look at it more strictly. But certainly, the goal – you have to remember the goal is to keep the public – the investing public – safe. That will come out this year or early Q1 for public comment, meaning people will be able to comment on it. People will be able to tell [if a rule is okay or if a rule is right or not]. But certainly we’re at the tail end of that journey. I know it’s been several years. I have mentioned in public multiple times that it will come out.”Kelvin Lee, Commissioner, SEC
The SEC first mentioned about releasing its own rules on digital asset exchanges (DAE) in 2019. The draft rules were eventually released by July of that year. A local meetup led by Atty. Rafael Padilla aimed to discuss the contents of the draft rules at that time.
In 2021, the SEC introduced its Fintech Innovation Office and unveiled plans to release comprehensive regulations governing digital asset offerings (DAO). These regulations will be presented in conjunction with guidelines for digital asset exchanges.
These rules, the SEC said in multiple interviews, were supposed to be released late into 2022.
However, an unexpected delay ensued due to the collapse of the international exchange FTX. This incident, the Commission stated, prompted the regulators to undertake a comprehensive revision of the entire regulatory framework to ensure that the Philippines would be better prepared to prevent situations similar to the FTX incident from occurring within its jurisdiction.
This article is published on BitPinas: SEC to Launch Digital Asset Security Service Provider Rules by Q1 2024
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