February 2, 2023

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SEC warns again about illegal crypto exchanges

The Securities and Exchange Commission (SEC) has again advised the public to conduct transactions with unregistered and unlicensed cryptocurrency exchanges that are accessible and deemed to be operating in the country.

The agency made the call amid the collapse of major international cryptocurrency exchange FTX in November. It had $1.24 billion in cash but still owed $3.1 billion, leaving hundreds of thousands of unsecured creditors with little to no ability to get their money back.

“A number of unregistered cryptocurrency exchanges are intentionally targeting Filipino investors and borrowers through online social media advertisements and unlawfully allowing Filipinos to access their online platforms and register, create or register customer accounts through online means,” the said SEC.

These firms offer various products and systems that pose high risk and sometimes fraud, the agency said.

Unregistered cryptocurrency exchanges include, but are not limited to, facilities or platforms for the following purposes:

Some of the offerings of these cryptocurrency exchanges include selling unregistered cryptocurrencies that qualify as securities, converting one cryptocurrency into another cryptocurrency, facilitating the issuance of unregistered coin or token offerings, offering cryptocurrency savings where a fixed or estimated value is promised in exchange for depositing cryptocurrency on the platform, offering crypto loans where users can get instant loans backed by digital assets, offering cryptocurrency derivatives and futures contracts, selling token stocks of companies, educational or Learning platform for this purpose to attract future customers and enable peer-to-peer cryptocurrency transactions.

“Always remember that when in doubt as to whether transactions with an online platform or entity are safe, always check with the SEC as to whether or not the entity or entity is registered,” the agency said.

A company must register with the SEC if it intends to do business in the Philippines.

Under Philippine securities laws, persons and securities may not be sold, offered for sale or distribution within the Philippines absent a registration statement duly filed with and approved by the SEC. In addition, no person in the Philippines may buy or sell securities as a broker or dealer, or act as a seller or affiliate of a broker or dealer, unless registered as such with the SEC.

In addition, under the Philippine Credit Laws, only companies registered in the Philippines are permitted to lend from their own funds or from funds of no more than 19 persons. Additionally, no lending company may conduct business unless it has been granted a license to operate by the SEC.