Draft rules on use of digital tokens out this week

The Securities and Exchange Commission (SEC) is set to issue this week a draft regulation on the use of digital tokens and cryptocurrencies as an investment tool in the Philippines, the first step in creating a framework for the rollout of initial coin offerings (ICOs).

In a chance interview on Friday night, newly-appointed SEC Chair Emilio Aquino said the draft framework required any company planning to launch an ICO to register their offering with the SEC, put funds in escrow and set up a platform for the trading of these digital tokens.

While the SEC earlier wanted to restrict ICO participation to qualified institutional buyers— or the more sophisticated investors—Aquino said the corporate watchdog was now considering allowing retail investors to participate in registered ICOs.

“We’re getting the best stuff from different models,” Aquino said at the sidelines of a reception hosted by Bangko Sentral ng Pilipinas (BSP). He cited the framework in Canada where retail investor participation was allowed subject to certain parameters.

But there are still very few models to consider at present given that ICOs are a new phenomenon.

ICOs, also known as token sales or coin sales, typically involve the creation of digital tokens—using distributed ledger technology—and their sale to investors by auction or through subscription, in return for a cryptocurrency.

In drafting the rules, Aquino said the SEC had kept in mind a warning from Vitalik Buterin, the cofounder of cryptocurrency Etherium, that “90 percent of ICOs are scams.” —DORIS DUMLAO-ABADILLA