All tokens are securities
As things stand, things don’t look great for would-be Philippian ICO organizers.
The latest proposal, published by the Philippian SEC (Securities and Exchange Commission) today (Thursday), assumes that all tokens issued via an ICO will be classified as securities.
As such, they will have to be registered with the SEC where they’ll be subject to more closer scrutiny and more stringent regulations.
The key bit of info regarding ICOs and securities is the following: "Therefore, the SEC will put the burden of proving that the tokens issued through an ICO in the hands of the proponents by presuming that the tokens are securities unless proven otherwise."
In addition, under the proposed rules, ICO organizers will be required to submit an application to the SEC at least 90 days ahead of the assurance.
As a further safeguard, all ICO proposals will also be required to contain names, addresses, and other info pertaining to all members of the team and, perhaps more importantly, the onus will be on them to prove the credibility of the project.
The application will also need to include legal testimony from a third-party justifying to the SEC why the project in hand is not in fact a security; so, no easy task!
If an ICO is only to be issued to a maximum of 20 people, or will be limited to institutional investors such as banks, insurance and investment firms, it could be exempted from the registration requirement.
The regulatory move comes as various countries worldwide are either developing legal frameworks to govern ICOs or are issuing guidelines on how to avoid falling foul of securities rules.
Most recently, a financial watchdog in Thailand moved to launch a legal registration process to allow ICO projects to fundraise in a compliant manner.
Good news for consumers
This isn’t necessarily bad news; regulators have reason to exercise caution when it comes to ICOs – they have, especially in Asian countries, become a hotbed of misrepresentation and outright fraud.
On an almost daily basis, a story come outs about a phony whitepaper or a team consisting of fake photos and falsified biographies; consumers need protection if they are to continue investing in these sorts of projects.
Yes, the proposed regulations may make life more difficult for ICO organizers but, for good reason.
Always research ICO projects thoroughly before investing.