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Companies and projects have increasingly relied on the sale of digital assets, or tokens, as a means of fundraising. These tokens generally do not grant the holders an ownership interest in the issuing company or project, but may provide governance rights, access rights or other utility. This has been conducted through public sales known as initial coin offerings (ICOs), proliferation through token generation events (TGEs) or private sales, among other mechanisms. While showing characteristics of traditional methods of fundraising, there are a range of unanswered questions related to the legal classifications of such products. As ICOs and TGEs will usually be distributed online and internationally, there is usually no single legal framework applying to such transaction, and the legal framework of each market in which the tokens may be offered or sold needs to be considered.
Introduction
Attitude of the country towards ICOs/token sales
Philippine regulators are crafting regulations that are intended to cover the issuance and sale of digital assets. This is seen as policymakers trying to catch up with the increasing prevalence of digital assets.
Legal affairs
Presence of any explicit regulation on ICOs and the issuance of token/coins
None. The SEC is currently soliciting comments on a draft Rules on Digital Asset Exchange and these rules have not yet taken effect.
Presence of any explicit restrictions on ICOs or the issuance, distribution and/or transfer of token/coins
N/A.
Obligations and requirements to issue token/coins
N/A.
Classification of token/coins in the jurisdiction
If the token is used for payment or investment purposes, this may be considered a “virtual asset” and the provider may be regulated under as a virtual asset service provider with the BSP.
The BSP’s current VASP regulations do not cover businesses involved in the participation and provision of financial services related to an issuer’s offer and sale of VA (which fall within the jurisdiction of the SEC) and entities solely acting on their own behalf (i.e. not engaged in the business of actively facilitating VA-related activities for the account of others).
Presence of a duty to publish a prospectus bevor offering token/coins to investors
N/A.
Presence of AML/KYC requirements that are needed to be fulfilled regarding (i) the initial issuance of token/coins and (ii) any following transfer of token/coins to third parties
N/A.
Additional comments regarding (i) the legal situation for ICOs/token/coins and (ii) any following transfer of token/coins to third parties
The SEC is currently soliciting comments on a draft Rules on Digital Asset Exchange and these rules have not yet taken effect. Pending issuance of these rules, the issuance and trading of ICOs/token/coins remain to be unregulated.
Economic conditions
Market size for ICOs/token sales and existence of any previous regulated ICO/token sales in the jurisdiction
ICO/token sales are not presently regulated in the Philippines.
Additional comments regarding the economic situation for ICOs/token sales or what companies must be aware of in this business area
N/A.