The Philippine Securities and Exchange Commission (SEC) is due to unveil the hotly anticipated draft regulation for cryptocurrencies in the next few days, if the information provided by The Manilla Times is correct. If the regulation reflects the previous enthusiastic efforts to implement cryptocurrency in the Philippines, information technology stands to play a seminal function in defining the land'southward status as a major player in the fintech sector. The SEC chairman, Ephyro Luis Amatong, has previously emphasised the need to regulate cryptocurrency exchanges as traditional trading platforms.

The draft comes in the wake of several Philippine lawmakers calling for the cosmos of a properly structured and higher up-board regulatory environs for Initial Coin Offerings (ICO) as the country opens up to the new engineering science. In spite of several successful DApps being developed in the country and the first of a promising upward tendency for the Filipino fintech industry, officials are aware of the demand to create a competent legislative framework to both protect their citizens from scams and for the sector to develop profitably.

In stark contrast to the bulk of other cardinal banks worldwide, the Philippines central bank — Bangko Sentral ng Pilipinas (BSP) — has been extremely proactive in ushering in both the implementation and regulation of cryptocurrencies. The central bank has developed a partnership with the SEC in order to establish "cooperative oversight." SEC Chairman Amatong explains their cooperation:

"We already discussed the matter with the BSP, since the BSP is also interested and we are also interested [...] The discussion […] [involves] joint cooperative oversight over [cryptocurrency exchanges] engaged in trading."

Dorsum in 2022, the BSP deputy director Melchor Plabasan fabricated clear his positive outlook on the potential of cryptocurrencies in a televised interview, stating that:

"If you want something that is fast, near real-fourth dimension and convenient, then at that place's the do good of using virtual currencies like Bitcoin."


Last typhoon builds on months-long efforts to create effective legislation

As previously reported by Cointelegraph, this upcoming draft is the simply the latest installment of the SEC'south attempt to regulate the cryptocurrency sector.

In Nov 2022, the SEC announced that it would motility to legalize digital currencies by classifying them as securities, using the case of new regulation in the The states, Malaysia and Hong Kong. The SEC chairman then-commissioner Emilio Aquino shed light on the developments in a news conference:

The direction is for us to consider this so-called virtual currencies offerings as possible securities, in which case we will apply the Securities Regulation Code. The heightened frenzy and increasing popularity surrounding Initial Coin Offerings has pushed authorities to lay downwardly new rules to protect consumers."

In August 2022, the SEC released their draft rules for public feedback. Co-ordinate to the official statement released by the local SEC, any company registered in the Philippines seeking to run an ICO must submit an initial asking to the commision, establishing whether their token qualifies equally a security. Companies must submit their assessment requests no less than 90 days earlier they plan to launch their sale period. The SEC will and then review the request within 20 days and provide its findings in a written report.

The report as well said that if ICOs were just to exist distributed amongst xx people or less, then registration with the SEC may non be compulsory.

The proposed legislative framework seeks to set out clear rules to avert the creation of fraudulent ICO projects. The SEC has been proposing to regulate crypto avails since late 2022. In Apr, the Philippines also floated the notion of defining cloud mining contracts every bit securities, given that the investors of the data centers operate the process via "investment contracts."

The SEC specified that they invited banks and investment houses, along with the investing public, to submit feedback on the proposed rules and set a deadline of Aug. 31.

Crime and punishment: The government cracks down on scams

Similar near countries in which cryptocurrency is a burgeoning platform, the Philippines has been victim to a number of scams, every bit naive investors seek quick returns on offers that are likewise good to be true while regulators scramble to keep up.

In May, an electronic mail circulated using the proper noun of President Rodrigo Duterte, along with high-contour members of the Senate, encouraging them to part with their hard-earned pesos in order to invest in cryptocurrency, with the promise of loftier returns.

The presidential spokesman for the Philippines was forced to step in and make a argument denouncing the electronic mail scam after President Duterte'due south brother'southward proper name was used in conjunction with the scandal.

In his official statement, Roque said:

"For your information, now that the President'due south brother [is being dragged into that cryptocurrency scam], the President has asked me at least three times to announce and inform the public not to entertain any person peddling their alleged influence with the President, including his relatives."

In another scandal, the Philippine's SEC issued a alert to investors near Onecash Trading, another digital currency provider promising attractive returns of over 200 percent to investors in only eight weeks:

"Facebook Account Onecash Trading is inviting the public to sign up to their website through a sponsored link and deposit an amount of P1,000 [$xx] as an enrollment fee. Upon activation thereof, a fellow member may opt to become a Trader with a promise receiving 25 percent return of investment every Thursday for eight consecutive weeks without doing annihilation, or to be a Builder wherein a member shall be receiving P fifty.00 [$one] per directly and indirect invites, up to the 10th level."

The SEC stated that all investment schemes that brand utilise of either fiat money or cryptocurrencies are deemed securities and are subsequently required to comply with existing regulations in the Philippines. The statement as well came with a warning: Those who fall foul of the police force could end up serving 21 years in prison house as well as paying up to $100,000 in fines.

Cryptocurrencies are a relatively recent phenomenon for most countries. Their sudden skyrocketing into the very heart of both public consciousness and the earth of finance has oftentimes caught governments and issuers past surprise. As a upshot of this, governments are frequently on the back foot when it comes to legislation, leaving the door wide open up for scammers. An instance of this is the January hack of Coincheck in Japan, which led to the theft of $532 million worth of NEM. Anger at the hack was compounded by the fact that Coincheck was not registered with Japan'south Fiscal Services Agency and was therefore not subject to the same level of scrutiny as other exchanges in the land. The exchange froze all transactions and issued an amends. The Coincheck security compromise is indicative of wider issues in the crypto globe, with over $1.2 billion worth of cryptocurrency stolen worldwide in 2022 solitary. However, investors and regulators akin are learning from their mistakes. With the Philippine government taking steps to scissure downward on cyber law-breaking, the wild west environs that has immune startups and scammers to flourish in equal mensurate is presently to depict to a close.

The current legislation put in place by the Philippine regime to deter cyber criminals has been accounted also tepid for some. Opposition politico Senator Leila de Lima is pushing a bill through the senate that seeks to impose drastically stricter punishments for crimes relating to cryptocurrencies.

In her authority as a former justice secretary, de Lima used the Apr 4 arrest of 2 individuals for an alleged P900 million ($17.2 one thousand thousand) Bitcoin scam to emphasize the need for Senate Beak No. 1694 to be passed:

"I hope that this occurrence volition push my esteemed colleagues in the Senate to take my proposed bill seriously and assistance laissez passer it into law soon. Knowing that virtual currency resembles money, and that the possibilities in using information technology are endless, higher punishment for its use on illegal activities is necessary."

De Lima provided a list of illicit activities that could apply cryptocurrencies:

"Where unscrupulous individuals entice unsuspecting people to purchase fake Bitcoins, sending a virtual currency equally payment for kid pornography or a public officer agreeing to perform an human action in consideration of payment in Bitcoins [direct bribery]."

De Lima's bill would determine the severity of the criminal activity by the equivalent value of the funds raised through illegal activity. Depending on the amount illicitly raised and the circumstances in which the funds were raised, individuals could face lengthy prison house sentences or even the capital punishment.

Cryptocurrency and blockchain could assist unite the Philippines fragmented payments sector

In a bid to keep the country at the forefront of the always-expanding crypto frontier, the Philippine regime has created the Cagayan Economic Zone Authority (CEZA). With countries like Malta and Switzerland already alee of the curve in welcoming both blockchain and cryptocurrencies, the CEZA is the country's response to the 'Crypto Valley' of Switzerland's Zug canton. The Philippine government permitted 10 blockchain and cryptocurrency companies to operate in the zone, with the aim of promoting economic growth and generating jobs for its citizens. In spite of appearances, the zone isn't just a taxation haven free-for-all. Companies are required to contribute no less than $i meg over a two-twelvemonth catamenia, which, in turn, is topped upwards by upward hundreds of thousands of dollars in fees.

CEZA deputy ambassador for planning and business organisation development Raymundo T. Roquero explained what businesses must practise to be able to operate in the zone:

"When they utilize, they will pay an application fee of $100,000 (P5.35 million) [and a] license fee of $100,000. And so you go into probity checks, so application programming integration (API), which costs an boosted $100,000."

In a anniversary granting licenses to operate in the zone in April, Roquero commented on some of the applications that had been successful:

"These are offshore companies, and they accept committed investments of $1 1000000 (P534.six million) each. GMQ intends to build [its] infrastructure in Sta. Ana, Cagayan […] and will have an incubation catamenia of two years, so they are already allowed to operate here in Manila."

Crypto activity in the Philippines, however, is not confined to the CEZA solitary. The U.Due south.-based visitor ConsenSys has launched Projection i2i — curt for "isle-to-isle," a payment network built on Ethereum that aims to connect the 400 rural community banks across the Philippines. Although at that place are apparently banks to serve the country's many rural communities, they are neither connected to whatever wider electronic networks nor international money transfer systems, pregnant that thousands of people are without a means of making quick and reliable payments.

Pic2The project uses a spider web API in social club to allow banks to connect to a blockchain backend. This allows users to both behave out transactions and to make utilise of smart contracts on permissioned blockchain via ConsenSys' Kaleido platform.

Transactions signed through this system will allow for the pledging of digital tokens corresponding to an amount of Philippine pesos in an off-chain business relationship, besides as redeeming and transferring tokens among other platform users.

Success stories help the government to keep an open mind almost cryptocurrencies

In spite of a stumbling start to the outright credence of cryptocurrencies, the Philippine authorities is conspicuously waking upwards to the many advantages that the technology can bring. This change has non gone unnoticed by some of the industry players.

In an interview with Nikkei, FintechAlliance chairman Lito Villanueva said:

"With these startups come huge investments in their portfolio. Surely, each country would want to take a piece of the action. Taking blockchain and fintech players in with enabling regulations and potential investment incentives would surely brand the game more exciting."

Some of the nation's startups accept already brought in considerable investment. Mayhap the Philippines' well-nigh well-known fintech startup success story, Coins.ph, raised $5 million in a Serial A funding round, securing investment from Naspers and Quona Capital. Other Philippine crypto pioneers include Flower Solutions and Satoshi Citadel Industries.

Aiai Garcia, global business organisation development lead for Consensys in Asia-Pacific commented on how the Philippines central bank's openness toward cryptocurrencies had benefited the industry within the land:

"Today, the Philippines has ane of the most advanced blockchain payments apps in the world [Coins.ph], which provides 1.five million Filipinos culling access to their finances and other value-added services. [Philippine] regulators were also among the first to announce the regulation of Bitcoin equally security."

Information technology appears that the regime is aware that the opportunities for fintech companies tin can bring benefits for itself. Department of Finance spokesperson Paola Alvarez said:

''Secretary [Carlos] Dominguez is really pushing for the application of financial technology. He wants to harness fintech to amend business, for example, payment of taxes online."

As both cryptocurrency and blockchain applied science gain footing across the globe, the potential benefits for the underdeveloped Philippine fintech industry are difficult to deny. The disparate and fragmented nature of the island's fiscal arrangement could be revolutionized thank you to initiatives such as i2i, along with the nation's many payment apps that have sprung upwardly in contempo years. With eager anticipation from high-profile government figures, the ICO regulations seem set to have the next footstep in defining the role of cryptocurrency in the nation's future.