Crypto Asset Service Providers in the Philippines: SEC Registration and Rules

What the SEC requires of crypto asset service providers

There is no single provision in the Securities Regulation Code that names crypto asset service providers. Instead, the Commission regulates them through its general authority over securities and over the persons who deal in them. Under Section 3.1 of the Code, securities include interests in a corporation or profit-making venture evidenced by a contract or instrument, whether written or electronic, and the Commission may determine other instruments to be securities in the future. Where a token or digital asset falls within that definition, offering or selling it in the Philippines requires a registration statement filed with and approved by the Commission under Section 8.1. Entities that act as brokers, dealers, exchanges, or clearing agencies for such assets fall under the Commission's licensing and supervisory powers.

Who counts as a crypto asset service provider

Philippine practice treats a crypto asset service provider as a business that, for the account of customers or its own account, facilitates the exchange, custody, or transfer of digital assets. The Code's definitions map onto these functions:

• A broker is a person engaged in the business of buying and selling securities for the account of others (Section 3.3).
• A dealer is a person who buys and sells securities for his or her own account in the ordinary course of business (Section 3.4).
• An exchange is an organized marketplace or facility that brings together buyers and sellers and executes trades of securities or commodities (Section 3.7).
• A clearing agency is any person who acts as intermediary in making deliveries upon payment to effect settlement in securities transactions (Section 3.6).

A platform that performs any of these functions over assets the Commission treats as securities must expect to be covered.

The registration and licensing framework

The Commission is the administrative agency that implements the Code (Section 4.1). Among its powers under Section 5.1 are to approve, reject, suspend, revoke, or require amendments to registration statements and registration and licensing applications; to regulate, investigate, or supervise the activities of persons to ensure compliance; to supervise, monitor, suspend, or take over the activities of exchanges, clearing agencies, and other self-regulatory organizations; to impose sanctions for violations; and to issue cease and desist orders to prevent fraud or injury to the investing public.

For the asset itself, Section 8.1 provides that securities shall not be sold, offered for sale, or distributed within the Philippines without a registration statement duly filed with and approved by the Commission, and that information on the securities must be made available to each prospective purchaser before the sale. Section 12.1 requires the issuer to file a sworn registration statement in the Commission's main office, in the form the Commission prescribes.

Registration of securities: how the process runs

Where a digital asset is a security, the issuer's path follows the Code:

1. File the registration statement. The issuer files a sworn registration statement with the Commission, including any prospectus required or permitted to be delivered (Section 12.1).
2. Sign and support the filing. The statement is signed by the issuer's executive officer, principal operating and financial officers, comptroller, principal accounting officer, and corporate secretary, supported by a verified board resolution (Section 12.4).
3. Pay the filing fee. The issuer pays a fee of not more than one-tenth of one percent of the maximum aggregate price at which the securities are proposed to be offered (Section 12.5[a]).
4. Publish notice. Notice of filing is published by the issuer, at its own expense, in two newspapers of general circulation once a week for two consecutive weeks (Section 12.5[b]).
5. Wait for the Commission's action. Within forty-five days from filing, or a later date consented to by the issuer, the Commission declares the registration statement effective or rejects it, unless an amendment is allowed under Section 14 (Section 12.6).
6. Comply with reportorial duties. Issuers covered by Section 17.2 must file an annual report within one hundred thirty-five days after the end of the fiscal year, along with interim and current reports the Commission prescribes (Section 17.1).

The Commission may reject or revoke a registration on grounds such as insolvency, violation of the Code or Commission orders, fraudulent transactions, false or misleading representations, or a registration statement that is incomplete or inaccurate in a material respect (Section 13.1). It may also suspend the offer and sale of securities pending investigation (Section 13.4).

Exemptions that may apply

Not every offering needs registration. Section 9.1 lists exempt securities, and Section 10.1 lists exempt transactions, including isolated transactions not made in the course of repeated and successive transactions of a like character, and sales to fewer than twenty persons in the Philippines during any twelve-month period. A person applying for an exemption under Section 10 must file a notice identifying the exemption relied upon and pay a fee equivalent to one-tenth of one percent of the maximum aggregate price or issued value of the securities (Section 10.3).

Whether an exemption applies to a particular token offering depends on facts the Commission assesses case by case. A crypto asset service provider should not assume that a digital asset falls outside the Code simply because it is not a share of stock.

Frequently asked questions

Do crypto exchanges need SEC registration in the Philippines? If the assets traded are securities under the Code, the platform's activities as a broker, dealer, or exchange fall within the Commission's licensing and supervisory powers under Section 5.1, and the offering itself may require registration under Section 8.1.

Are all crypto tokens securities? No. Section 3.1 defines securities broadly and allows the Commission to determine other instruments as securities in the future. Coverage depends on the nature of the asset and how it is offered.

What happens if a crypto asset is sold without SEC approval? Section 8.1 prohibits the sale, offer for sale, or distribution of securities without an approved registration statement. The Commission may impose sanctions for violations and issue cease and desist orders under Section 5.1.

Practical takeaways

• The Securities Regulation Code does not name crypto asset service providers, but the Commission's powers over brokers, dealers, exchanges, and clearing agencies reach them where the assets are securities.
• Offering or selling a security in the Philippines requires a registration statement filed with and approved by the Commission under Section 8.1.
• Registration involves a sworn filing, a fee of not more than one-tenth of one percent of the maximum aggregate offering price, newspaper publication, and a forty-five-day action period.
• Exemptions exist under Sections 9 and 10, but they are fact-specific and require a filed notice and fee.
• Registered issuers carry continuing reportorial obligations under Section 17.

Primary sources

The rules discussed above are drawn from the following primary sources, as published in the Official Gazette and the national statute book.

• REPUBLIC ACT NO. 8799 - THE SECURITIES REGULATION CODE

• REPUBLIC ACT NO. 10718 - AN ACT SEPARATING THE KALINGA NATIONAL HIGH SCHOOL – SALEGSEG ANNEX IN BARANGAY SALEGSEG, MUNICIPALITY OF BALBALAN, PROVINCE OF KALINGA FROM THE KALINGA NATIONAL HIGH SCHOOL, CONVERTING IT INTO AN INDEPENDENT NATIONAL HIGH SCHOOL TO BE KNOWN AS BALBALAN NATIONAL HIGH SCHOOL AND APPROPRIATING FUNDS THEREFOR

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.