The Philippines continues to be a forerunner in crypto adoption, maintaining a position among the leading countries. According to blockchain intelligence firm Chainalysis, the nation currently holds the sixth rank, showcasing strong performance in both centralized and decentralized finance service value. Although this indicates a slip from the previous year’s second position, industry pioneers in the Philippines are optimistic, perceiving an increased embrace of blockchain technology by Filipinos, extending beyond cryptocurrencies. 

Like several nations around the world, the Philippines is progressing towards establishing a structured regulatory framework for cryptocurrencies. However, the enactment of a digital assets framework by the country’s Securities and Exchange Commission (SEC) has been deferred, attributed to the late 2022 collapse of FTX, a cryptocurrency exchange based in the Bahamas. 

During Philippine Blockchain Week, Jenny Ortiz-Bolivar of Forkast engaged in an exclusive discussion with Kelvin Lester Lee, the Philippine SEC Commissioner, delving into the agency’s perspective on cryptocurrencies and digital assets, the rampant rise of crypto scams in the nation, the collaboration initiatives with Southeast Asian countries, and the enforcement actions undertaken by the U.S. SEC. 

See related article: Philippines regulator warns against Gemini Derivatives for unregistered securities

The following Q&A has been edited for clarity and length.

Jenny Ortiz-Bolivar: The (Philippines) SEC delayed the publishing of the country’s crypto framework and the reason that the agency cited was the FTX collapse. What’s the latest development on this? When can we expect the framework to be out?

Kelvin Lester Lee: We will have it out for public comment in the next month or so. From there, we will see about implementation, whether at the end of the year or the first or second quarter of next year, depending on feedback from the public. One message I’d like to get out now is: please wait for that draft when it comes out, please comment, and help guide us along on how to move forward with this.

We want to make sure that the public has buy-in in relation to this. We want to make sure that the public is ready for this as well, because admittedly, the way we were setting it up, we want to protect the general public. We want to make sure that it’s not too prohibitive that businesses such as crypto platforms cannot operate.

I’m not saying we will regulate all cryptocurrencies. That’s not the direction. We will assess and see which cryptocurrencies or digital assets — as we will call them — would be operating or can be considered as securities. That’s what we will regulate.

Ortiz-Bolivar: What’s the stance of the SEC on cryptocurrency, stablecoins, and other digital assets such as non-fungible tokens, or NFTs?

Lee: Cryptocurrencies as a whole, I’m open. We’re generally open to it because we understand that this is the next step of the evolution when it comes to the financial system. We get that. So of course we want to try to accommodate it, subject to appropriate laws.

Now, on the point of the NFTs, we will treat the NFTs depending on how they are used. If the NFT is going to be used as an art form, then we leave it alone. But, if it operates and is trying to be like securities, an actively traded digital asset, then obviously we’ll have to treat it somewhere in a different manner. This is, by the way, the mechanism that the Monetary Authority of Singapore is using. 

I actually learned that from them when I talked to my counterpart there and we were having discussions on this earlier this year and they had guided me that that’s how they’re dealing with NFTs. I thought we would adopt something similar to that in an unofficial capacity. We didn’t come out with regulations for this, but certainly, that’s how we’re looking at treating it once the digital asset offering regulations come out.

Ortiz-Bolivar: You mentioned the MAS. Is there a collaboration between other regulators, and neighboring countries? How is it?

Lee: Very good. We have something called the ASEAN Capital Markets Forum. So, my counterparts in the ten different ASEAN countries are part of that and we collaborate regularly. We meet four times a year. The next one is in Bali next month. I’m the Philippine representative to that and one of the agenda usually is discussion on the different treatments and the different regulatory regimes we use for digital assets and cryptocurrencies. That’s why our collaboration in relation to that is continuous and very good.

Ortiz-Bolivar: I want to talk about the U.S. This year, the U.S. SEC conducted what some industry leaders call a crackdown on the crypto industry. Would the Philippine SEC mirror the move?

Lee: We have very good relations with the U.S. SEC. Just a few weeks ago, the U.S. SEC actually sent a delegation here to train our people on enforcement and how to treat not only digital assets but how to treat sustainable finance and different related capital market regulations. There are currently no plans to go that direction, meaning a crackdown. 

We are, however, supportive of the U.S. SEC’s position being a counterpart agency, but we defer to how they do things in their jurisdiction. In the same way, they will defer to us on what we do in our jurisdiction. Now, whether or not we will ever go into a crackdown, will depend on what happens with our local players. If there are abuses, then we’ll be forced to do that.

Ortiz-Bolivar: One pressing issue in the Philippines now is the proliferation of crypto scams – victimizing Filipinos and even using them to be part of it. The number of victims and the amount of money involved are so alarming that it even reached the Senate floor. What can you say about this? Is there an effort on the side of the SEC to protect Filipinos from this?

Lee: Interestingly enough, a lot of these crypto scams are not generally crypto-related. They’re generally just Ponzi schemes and then they just use the crypto tag to make it sexier to the public so that they’ll invest. We’ve conducted raids, we’ve conducted advisories, we’ve issued cease and desist orders against different entities already in relation to that. 

I’d like to strongly emphasize to the public: check with the SEC before you invest or do anything in relation to investing your money, digital assets, or whatever you call it. Please check with the SEC so that you’ll know whether that company exists or not, whether the company is real or not, or whether the company is even registered in the Philippines. So be very, very careful before you invest and check with the SEC.

See related article: What the US can learn from the Philippines to regulate crypto in a smarter way