The Securities and Exchange Commission on Thursday issued the draft rules on initial coin offerings in a bid to regulate the trading of cryptocurrencies, or digital tokens.
The SEC said the proposed rules, which would be open for public comment, were benchmarked from the rules in various jurisdictions and markets.
An ICO is a fund-raising activity usually by a start-up company that issues cryptocurrency or virtual coins to investors. While ICOs offer opportunities for small and start-up businesses to raise capital, they are also being used for fraud and manipulation.
Under the proposed ICO rules, the digital tokens issued by the startups or companies conducting the ICO should be registered with the SEC and will be required to make necessary disclosure to protect the investing public.
Among the salient points of the draft rules include requiring all ICOs to undergo an initial assessment by submission of initial assessment request and registration statement.
Startups who will conduct ICOs of security tokens will be required to incorporate, while foreign corporations are required to maintain a branch office in the Philippines.
Companies issuing ICOs will be required to keep the proceeds under escrow so that proceeds will be withdrawn only upon the presentation of the progress report.
SEC chairperson Emil Aquino said the final rules on ICOs are expected to be released before the end of the year.
Meanwhile, the SEC on Thursday issued a warning against four companies that offering digital coins to the public. These companies include Paysbook E-commerce Systems Co. Ltd., Purewealth EBC Corp., Cypto Expert Inc., and Yeheey! iTraffi Systems Inc. Jenniffer B. Austria
Based on information received by SEC, Paysbook offers online investments and cryptocurrency called “Indegen Coins” to the public. Purewealth is offering its cryptocurrency called “Purepound” to the public.
Crypto Expert and Yeheey are also offering online investments to the public.
These firms promise investors unrealistic returns on investments as well as commissions for every person recruited to their programs.