Philippine SEC proposed treating ICO tokens as securities unless issuers proved otherwise

The Philippine Securities and Exchange Commission placed proposed rules for initial coin offerings into public consultation on August 2, 2018, advancing a framework that presumed tokens sold through ICOs were securities unless their promoters demonstrated otherwise.

That presumption was the draft’s most consequential feature. Rather than leaving buyers to decide whether a token represented an investment contract, the proposal put the classification burden on the issuer and required the Commission to assess the offering before it proceeded. The consultation remained a proposal on August 2; it was not yet a final or effective rule.

An assessment before the token sale

The draft covered ICOs conducted in the Philippines, offerings by Philippine startups or corporations, and offerings targeting people in the country through online platforms. A prospective issuer would submit an initial-assessment request, its proposed white paper and supporting documents at least 90 days before the planned presale.

Contemporaneous accounts of the draft said an issuer seeking a determination that its token was not a security would need to support that position, including through an independent legal opinion. After receiving complete documents, the SEC would have 20 days to make its initial assessment and issue a written determination. The proposal contemplated an extension of that review period, underscoring that the stated timetable was not an automatic approval deadline.

If the Commission classified the token as a security, the sale could still proceed only after registration or qualification for an available exemption. The draft also contemplated exempt transactions involving no more than 20 purchasers or specified institutional investors. Those exceptions did not erase the initial classification question; they addressed whether an otherwise covered offering had to complete full registration.

Disclosure moved beyond the white paper

For registered security-token offerings, the proposed framework called for disclosures and controls extending beyond the promotional white papers commonly used by ICO projects. Reported requirements included an independently prepared source-code audit, know-your-customer and anti-money-laundering procedures, descriptions of technology and security risks, and information about the issuer, team, advisers, token economics and intended use of proceeds.

Startups issuing security tokens would need to incorporate, while a foreign corporation would need a Philippine branch. That structure mattered because it attempted to give investors and regulators an identifiable legal entity inside the jurisdiction rather than relying exclusively on a website, distributed development team or offshore token contract.

The SEC invited banks, investment houses, investors and other interested parties to comment by August 31, 2018. The consultation therefore established a policy direction, not a completed licensing system. No issuer could accurately cite the August 2 publication alone as proof that its tokens were approved, registered or legally compliant.

Why the proposal mattered

ICOs had enabled projects to solicit funds across borders without consistently using the prospectuses, audited disclosures and intermediary controls associated with conventional securities offerings. The Philippine proposal sought to preserve a route for token-based capital formation while making securities classification a regulator-led inquiry and placing the evidentiary burden on promoters.

That approach also separated two questions often blurred in ICO marketing: whether a token used blockchain technology and whether its sale constituted a securities transaction. Under the draft, technical design or a utility label would not by itself settle the legal analysis.

The surviving record supports the consultation date, its proposed status and its central securities presumption. It does not establish that the draft became binding in the form published on August 2, 2018, or that any particular token qualified for registration or exemption. Those questions required subsequent Commission action and offering-specific review.