By Revin Mikhael D. Ochave, Reporter

THE NEW GUIDELINES of the Securities and Exchange Commission (SEC) on crypto-asset service providers (CASPs) might discourage smaller players due to steep capitalization requirements.

Corporations interested in becoming CASPs should register with the corporate regulator and must have a minimum paid-up capital of at least P100 million in cash or property, excluding crypto-assets, based on SEC Memorandum Circular No. 5 that contained guidelines on the operations of CASPs.

Under the rules, a corporation is required to show proof that it has met the minimum capital requirement and that it has sufficient financial resources to “ensure that the business is resilient.”

A corporation also needs to apply for a license with the SEC to operate as a CASP.

Jiro Luis S. Reyes, chief executive officer at crypto education platform Bitskwela, said the capital requirement is “overregulation.”

“The P100-million capitalization required for CASPs stands as a major problem for most builders in the Philippines. This is overregulation in my opinion. There should be tiers to this at the very least,” he said in a Viber message.

“Since the CASP rules cover any CASP, this could technically mean that anyone who wants to build a homegrown Pinoy Web3 product would need to meet the P100 million,” he added.

Mr. Reyes said the high capitalization requirement might push smaller Filipino companies to consider establishing their platform in other countries. 

“This would probably mean that Filipino builders would just choose different markets or countries to launch in, resulting in less innovation for us,” he said.

“Larger players will have an easier time penetrating the market — there are clearer rules now, which work in their favor. But for smaller players and communities, it feels like a loss. There’s not much upside for them at this stage,” he added.

Arlone P. Abello, founding chairman of the Innovative Movement of the Philippine Association of Crypto Traders, recommended a differentiated approach on the CASP registration requirements depending on the size of the corporation.

“These requirements ensure operational accountability but could be more challenging for early-stage startups with limited resources. A differentiated approach may help support innovation while upholding oversight,” he said in a Viber message.

INVESTOR PROTECTION
At the same time, Mr. Abello said the SEC should also consider releasing rules on anti-manipulation and insider trading to boost investor protection.

“These are important investor protection measures, and their reintroduction via future rules or guidance may be helpful.” he said. “This will supplement the current framework and align with international investor protection standards.”

Mr. Abello also suggested improved coordination among regulators such as the SEC, Bangko Sentral ng Pilipinas, and the Department of Information and Communications Technology to boost compliance.

“There should also be enhanced coordination among relevant regulators to ensure a harmonized compliance environment, especially for multi-layered business models,” he said.

In terms of investor education, Mr. Abello suggested a voluntary certification system for crypto educators to help differentiate educational content from promotional activities.

He also urged the creation of a public portal where applicants and stakeholders can access guidance on registration steps, obligations, and key timelines.

Meanwhile, GCash Vice-President & Group Head for New Businesses Winsley Royce Bangit said in a Viber message that the move to regulate CASPs will help build trust, protect consumers, and legitimize the industry.

“Clear regulatory guidelines create a more stable environment for innovation and allow responsible players like us to grow sustainably while ensuring user security,” he said.

The GCash app offers the GCrypto cryptocurrency trading platform that allows users to buy, sell, and manage cryptocurrencies. GCrypto has 2.7 million users, and 48 cryptocurrencies offered as of the first quarter.

The SEC’s guidelines also require corporations to submit various documents such as a business plan, a written description of the software and hardware components, business conduct rules, and listing and delisting standards for admission of crypto-assets to trading.

The SEC said that an estimated $40 billion worth of cryptocurrency value was received by the Philippines from July 2023 to June 2024, citing data from the 2024 Geography of Crypto Report of Chainalysis.

“The Philippines is experiencing a widespread adoption of crypto-assets. The continued growth and development of new crypto-asset markets, services, and business models relies on clear, proportionate, and robust regulatory frameworks, which can ensure that markets are fair, efficient, and transparent,” the SEC said.

In April, the SEC opened the applications for participation in the strategic sandbox for CASPs. The sandbox provides a controlled environment where CASPs can test and pilot their products.