January 30, 2023

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SEC warns anew vs illegal crypto exchanges

2 min read

THE Securities and Exchange Commission (SEC) has reiterated its advice to the public against transacting with unregistered and unlicensed cryptocurrency exchanges that are reachable and deemed operating in the country.

The agency made the call amid the collapse of large international cryptocurrency exchange FTX in November. It had $1.24 billion in cash but still owes $3.1 billion that left hundreds of thousands of unsecured creditors with little to no recourse of recovering their money.

“A number of unregistered cryptocurrency exchanges are deliberately targeting Filipino investors and borrowers through online advertisements in social media and unlawfully allowing Filipinos to access their online platforms and permit the enrollment, creation or registration of client accounts through online means,” the SEC said.

These firms offer different products and schemes which are high risk and sometimes fraudulent, the agency said.

Unregistered cryptocurrency exchanges include and offer facilities or platforms for the purpose of, but are not limited to the following:

Some of the offerings of these cryptocurrency exchanges include sale of unregistered cryptocurrencies deemed as securities, conversion of one cryptocurrency to another cryptocurrency, facilitation for the issuance of unregistered coin or token offerings, offering of cryptocurrency savings where there is a promise of a fixed or estimated return in exchange for depositing cryptocurrency in the platform, offering of crypto-loans where users may obtain instant loans secured by digital assets, offering of cryptocurrency derivatives and futures contracts, sale of tokenized shares of stocks of corporations, educational or learning platform for the purpose of enticing future clients and enabling peer-to-peer cryptocurrency transactions.

“Always remember that in case of doubt as to whether or not it is safe to transact with an online platform or entity, always check with SEC if the corporation or entity is registered or not,” the agency said.

An entity is required to register with the SEC if they intend to conduct business in the Philippines.

Under Philippine securities laws, persons, securities shall not be sold or offered for sale or distribution within the Philippines, without a registration statement duly filed with and approved by the SEC. Moreover, no person shall engage in the business of buying or selling securities in the Philippine as a broker or dealer, or act as a salesman, or an associated person of any broker or dealer unless registered as such with the SEC.

Moreover, under Philippine lending laws, only corporations registered in the Philippines are allowed to engage in granting loans from its own capital funds or from funds sourced from not more than 19 persons. In addition, no lending company shall conduct business unless granted an authority to operate by the SEC.