SEC poised to tighten rules covering crypto, digital assets

The Securities and Exchange Commission (SEC) is finalizing the implementation of short-selling within the year while preparing a stricter set of proposed rules covering cryptocurrencies and other digital assets.

SEC Commissioner Kelvin Lester Lee said the corporate watchdog is keen on pushing out new regulations to further boost the capital markets amid strong interest from local and foreign participants while ensuring its mandate to protect investors.

“I want to make us a viable investment destination, not just for the foreign investors, but also for our local players,” he said in a recent interview with the Inquirer.

Lee, an expert in sustainable and finance and financial technology, is at the forefront as the supervising commissioner of the markets and securities regulation department and the information and communications technology department.

“A lot of people want to invest in Asean (Association of Southeast Asian Nations), in particular, the Philippines,” said Lee, who is also working on various green and sustainable finance frameworks.

Critics have pointed out the SEC was slow to adapt to rapid changes in technology and finance. One example is short-selling, which allows investors to profit from a drop in share prices and whose final implementation has been delayed for decades.

Lee said certain short-selling rules were approved by the corporate regulator but these were found to be “not viable.”

He said the SEC was still reviewing the role of Philippine Depository and Trust Corp. as short-selling agent. While outside their direct scope, he also disclosed possible tax concerns based on discussions with the Bureau of Internal Revenue.

Nevertheless, Lee said they intend to come out with a final framework that will allow short-selling before the end of 2023 .

“We are cooperating with the [Philippine Stock Exchange] to get this out and I have to laud the PSE for their strong interest in this,” Lee said.

Lee said they will also seek comments from industry stakeholders this year on their plan to regulate cryptocurrencies such as Bitcoin, Ether and thousands of other digital assets as well as the exchanges where these will be traded.

He said the Philippine government recognizes the sector and their intention is to jointly regulate the space alongside the Bangko Sentral ng Pilipinas.

Public comments are needed as the SEC finalizes its digital asset offering rules and digital asset exchange rules.

“We are cognizant and aware of the fact that cryptocurrencies and digital assets could be a viable alternate asset class,” he said.