SEC releases draft rules on initial coin offerings

The Securities and Exchange Commission (SEC) released on Thursday its proposed rules governing the registration of initial coin offerings (ICOs).

In a statement, the regulator said the draft rules on ICO registration was released so the public may comment what they think about the rules.

Tokens issued by the startups or companies conducting the ICO must register with the SEC. All necessary disclosures must be issued to protect the investing public.

“Nevertheless, despite being analogous to securities, the present registration process for initial public offering (IPO) may not be tailor-fit for initial coin offering. Hence, the proposed rules have been formulated for the registration of security tokens offered through initial coin offerings,” it said.

Studies of various ICOs conducted in the Philippines showed that proponents claimed that tokens are not securities—therefore are not under jurisdiction of the SEC.

“Allowing this practice is proven dangerous to the investing public who are left with no clear recourse once the said ICOs are proven to be scams,” the SEC emphasized.

“Therefore, the SEC will put the burden of proving that the tokens issued through an ICO in the hands of the proponents by presuming that the tokens are securities unless proven otherwise.”

ICOs are “distributed ledger technology fundraising operations involving the issuance of tokens in return for cash, other cryptocurrencies or other assets,” according to the commission.

“They involve coins or tokens being issued in order to raise money from the general public.”

The benefits tokenholders may gain include profits or higher value of tokens which can be sold if the ICO is successful, as well as voting or governance rights, or usage rights. —VDS, GMA News