The Philippines remains at the forefront of crypto adoption, ranking among the top countries in this field. According to Chainalysis, a blockchain intelligence firm, the Philippines holds the sixth position globally, displaying impressive performance in both centralized and decentralized finance services. Although this represents a slight decline from the previous year’s second spot, industry leaders in the Philippines are optimistic and believe that Filipinos are increasingly embracing blockchain technology beyond just cryptocurrencies.
Similarly to many other countries, the Philippines is working towards establishing a comprehensive regulatory framework for cryptocurrencies. However, the enactment of a digital assets framework by the country’s Securities and Exchange Commission (SEC) has been delayed due to the collapse of FTX, a cryptocurrency exchange based in the Bahamas, in late 2022.
During the Philippine Blockchain Week, Jenny Ortiz-Bolivar of Forkast had an exclusive discussion with Kelvin Lester Lee, the Philippine SEC Commissioner, to explore the agency’s perspective on cryptocurrencies and digital assets, the rise of crypto scams in the country, collaboration initiatives with Southeast Asian countries, and the enforcement actions carried out by the U.S. SEC.
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The following Q&A has been edited for clarity and length.
Jenny Ortiz-Bolivar: The SEC of the Philippines delayed the release of the country’s crypto framework, citing the FTX collapse as the reason. What is the latest development on this, and when can we expect the framework to be released?
Kelvin Lester Lee: We will make the framework available for public comment in the next month or so. After that, we will decide on the implementation timeline based on the feedback received from the public. I want to emphasize that it is important for everyone to wait for the draft and provide their comments to guide us forward. We want to ensure that the public is ready and involved in this process. We aim to strike a balance where we can protect the general public without creating excessive barriers that prevent crypto platforms from operating.
Let me clarify that we will not regulate all cryptocurrencies. We will assess and determine which cryptocurrencies or digital assets can be considered as securities and regulate them accordingly.
Ortiz-Bolivar: What is the SEC’s stance on cryptocurrencies, stablecoins, and other digital assets like NFTs?
Lee: Overall, we are open to cryptocurrencies because we understand that they represent the next step in the evolution of the financial system. However, we will accommodate them within the framework of appropriate laws.
Regarding NFTs, our approach will depend on their use. If an NFT serves as an art form, we will not interfere. However, if it operates as a security or an actively traded digital asset, we will treat it differently. This approach is similar to the Monetary Authority of Singapore’s mechanism, which I learned during discussions with my counterparts there. Though we haven’t officially issued regulations, this is how we plan to treat NFTs when the digital asset offering regulations are released.
Ortiz-Bolivar: Is there collaboration among regulators in neighboring countries? How is it?
Lee: Collaboration among regulators in Southeast Asian countries is excellent. We have the ASEAN Capital Markets Forum, where representatives from the ten ASEAN countries meet regularly to discuss various topics, including digital assets and cryptocurrencies. We collaborate and exchange ideas on the different treatment and regulatory regimes for these assets. This ongoing collaboration has been fruitful and beneficial.
Ortiz-Bolivar: This year, the U.S. SEC conducted a crackdown on the crypto industry. Will the Philippine SEC follow suit?
Lee: We maintain a good relationship with the U.S. SEC. Recently, they sent a delegation here to train our staff on enforcement and the treatment of digital assets, sustainable finance, and related capital market regulations. Currently, there are no plans for a crackdown in the Philippines. We support the U.S. SEC’s position as a counterpart agency, but we defer to their jurisdiction. Similarly, they defer to us in our jurisdiction. Whether we take any enforcement actions will depend on the behavior of our local players. If abuses occur, we will be forced to take action.
Ortiz-Bolivar: The proliferation of crypto scams, victimizing Filipinos and involving significant amounts of money, is a pressing issue in the Philippines. Does the SEC have any efforts to protect Filipinos from these scams?
Lee: Interestingly, many of these scams are not directly related to cryptocurrencies. They are often Ponzi schemes that use the crypto tag to attract investors. We have conducted raids, issued advisories, and issued cease and desist orders against various entities involved in these scams. I urge the public to check with the SEC before investing or engaging in any activities related to digital assets. Verify if a company exists, if it is registered in the Philippines, and if it is legitimate. It is crucial to exercise caution and consult with the SEC.
See related article: What the US can learn from the Philippines to regulate crypto in a smarter way