Finding the Right Balance or Going Too Far? SEC’s Proposed Crypto Asset Rules Ignite Controversy in Online Communities | BitPinas

Following the recent release of the Philippines’ Securities and Exchange Commission (SEC) draft of the “SEC Rules on Crypto-Assets Service Providers” (CASP), the Philippine crypto community shared diverse opinions. 

What is the rule on CASP: It aims to establish a robust regulatory framework for entities offering crypto-related services. The draft rules outline comprehensive requirements and obligations for these entities, aiming to ensure transparency, security, and compliance with financial and anti-money laundering regulations.

What are CASPs as per the SEC: CASPs refer to Crypto-Asset Service Providers, defined as entities that offer services related to crypto-assets in the Philippines or services that impact its markets. 

The comments reflect mixed reactions to the SEC’s draft crypto rules, with some urging proactive community engagement and balanced regulation, while others criticize the rules as restrictive, misaligned with innovation, or motivated by control rather than protection.

There are responses to the SEC draft rules for crypto regulation that reflect a mix of optimism and caution. One community member calls for a comprehensive legislative framework from Congress to address cryptocurrencies, blockchain, and digital assets holistically. There are also comments that appreciate the progress in adoption and the potential to reduce scams.

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“These SEC crypto rules are like training wheels for a fast-moving bike—necessary, but they shouldn’t slow innovation down. Maintaining a balance between protecting investors and promoting progress is crucial. Let’s ensure the Philippines stays ahead in the crypto race!” Henry James Banayat, Executive Managing Director at Bitshares Labs, wrote noting that the deadline for the comments on the draft is also drawing near.

Christine Erispe added that she sees the rules as a positive step, emphasizing that clear but non-restrictive regulations can attract legitimate investors to the local crypto scene.

Another comment emphasized the positive aspect, noting that the rules represent a step toward consumer protection by requiring crypto exchanges, coins, tokens, and providers to adhere to guidelines, helping prevent sudden losses due to crypto manipulation. The commenter also highlighted that the rules specify that airdrops and free distributions are exempt from certain taxes.

In addition, regarding the rules prohibiting futures trading, one comment supported the SEC, noting that futures trading is manipulated, with whales exploiting it to earn easy money. The commenter argued that whales can easily manipulate prices through pump-and-dump tactics, triggering liquidations and profiting from market volatility.

Criticisms

Critics of the SEC draft rules voiced concerns about their originality, intent, and effectiveness. One of the comments criticized the perceived imposition of Western ideologies, while another argued the rules could stifle innovation and burden startups, viewing them as a step backward and questioning the SEC’s understanding of crypto. 

“It’s just a MICA copy-cat. Regulators here rarely have a sense of independent thought and prefer to copy what other countries do,” a community member stated. 

Expressed Frustrations: 

There are also critical comments that reflect frustration with the SEC’s approach to cryptocurrency regulation. A commenter fears manipulation by the authorities, while another compared the Philippines’ lack of advanced trading options to more developed countries like the US, questioning how the SEC expects to encourage Philippine Stock Exchange (PSE) trading under such limitations. They suggest that the country is falling behind and that investors might find better opportunities abroad, where such options are already approved and accessible.

Carlos Tapang, CEO of Rock Stable, argues that while scams are a concern, the SEC’s restrictions would hinder innovation rather than solve the problem. He argued that they hinder innovation and make it difficult for startups to attract investment. Tapang points out that in the U.S., setting up a corporation is quick and easy, but in the Philippines, it is a lengthy and costly process. He questions why the SEC needs to control corporate formation and whether they are better judges of a business’s viability than investors.

“It takes less than an hour to set up a corporation in the U.S. In Pinas, it took me three months and three lawyers (to set up a corporation). Why does the SEC have to gate the formation of corporations? Do they know something that investors do not know? Are they better judges of the viability of a business than the investors?“

“In the U.S., as many as thousands of corporations can be formed every month, in a state. Only a few of these will survive after a year or two. Allow the people to see how far they can take their ideas. From these thousands of ideas, a few will pan out. Is the SEC claiming that they know which ones of the startup applicants would succeed?” he wrote.

Further, a community member also stressed that the draft rules could complicate things for developers, coin creators, and promoters, especially those behind new tokens and memecoins. These entities will be required to register with the SEC, and failure to do so could lead to their ICOs, social media promotions, and other activities being deemed invalid, potentially resulting in bans or closures in the Philippines.

Suggestions: 

In another note, one of the comments suggested that the current penalties for cryptocurrency-related crimes, including a maximum 5-year prison sentence and fines up to ₱2 million, are too lenient. 

They argue that such penalties do not deter criminals, as they could still potentially make large sums, like ₱100 million, and only serve a short prison sentence. They propose much harsher penalties, such as a minimum 30-year prison sentence and fines of at least ₱20 million, to more effectively discourage fraudulent activity in the crypto space.

On the other hand, a comment argues that since cryptocurrencies are not yet classified as securities in the Philippines, the SEC does not have jurisdiction to regulate them. It suggests that Congress should first pass legislation defining cryptocurrencies before the SEC enforces any rules, ensuring a legal foundation for regulation.

There are also comments that encourage the Philippine crypto community to take advantage of the opportunity to provide feedback on the SEC’s draft rules before they are finalized. By using the window for public comments, the community can ensure that the regulations protect investors while also allowing the industry to grow and thrive.

The SEC is requesting public input on its proposed rules until January 18, 2025. Feedback can be submitted via email to fintech@sec.gov.ph or by physical mail to their office in Makati.

Worth reading: Recently, BitPinas outlined the Philippines SEC’s draft rules for crypto-asset service providers, establishing regulatory requirements for registration, market conduct, compliance, cybersecurity, and penalties.

This article is published on BitPinas: Striking a Balance or Overstepping? SEC-Proposed Crypto Asset Rules Spark Heated Community Discussions

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