A New Era for Crypto in the Philippines: SEC Tightens Rules on Crypto-Asset Service Providers (CASPs)

Yasser Aureada
Jun 2
4 min read

Introduction

In a bold and highly anticipated move, the Securities and Exchange Commission (SEC) of the Philippines issued Memorandum Circular No. 5, Series of 2025, prescribing the Guidelines on the Operations of Crypto-Asset Service Providers (CASPs). This issuance is one of the most critical regulatory reforms in Philippine finance in recent years.

The Circular introduces a comprehensive regulatory framework for crypto-asset exchanges, custodians, brokers, trading platforms, and other service providers involved in digital asset activities. It underscores the government’s proactive commitment to fostering innovation, while protecting the investing public and preserving financial system integrity.

Why This Circular Matters to the Philippine Legal and Financial Sector

The regulation of crypto-asset services impacts multiple layers of the economy:

Investor Protection – The SEC aims to eliminate fraudulent schemes, wash trading, and “rug pulls” that have victimized Filipinos in the past.
Fintech Advancement – Establishing legal certainty encourages innovation in blockchain, Web3, and DeFi platforms.
Capital Formation – Promotes responsible digital fundraising and tokenization efforts with proper safeguards.
Regulatory Convergence – Aligns the Philippines with international standards, including FATF, IOSCO, and APAC fintech regulations.
Legal Risk Management – In-house counsels and compliance officers must now re-evaluate business models, risk controls, and disclosures to avoid liability and regulatory breaches.

Scope of the Guidelines: Who Must Comply?

All entities classified as Crypto-Asset Service Providers (CASPs) are covered. These include:

Crypto exchanges
Wallet providers
Token offering platforms
Brokers and dealers
Custodians of crypto-assets
Digital asset investment platforms
Third-party marketing platforms involved in crypto

Foreign CASPs intending to operate in the Philippines or target Filipino users must also comply.

Key Regulatory Requirements

1. Incorporation and Capitalization

Must be registered with the SEC as a domestic corporation.
The primary purpose in the Articles of Incorporation must reflect CASP activities.
Required minimum paid-up capital: ₱100,000,000, excluding crypto-assets.

2. Physical Presence and Personnel

Must maintain a physical office in the Philippines.
Must be appropriately staffed during business hours in compliance with the Revised Corporation Code.

3. Comprehensive Application Submission

CASPs must submit:

CASP Form 1
Board Resolution approving the registration
Business conduct rules, listing and delisting standards
Independent risk control unit plan
Software architecture, IT and communication systems design
Market surveillance capabilities
Client onboarding procedures and KYC/AML framework
Risk disclosure matrix and business continuity plan
Proof of payment of fees

Trading and Listing Standards

Before admitting a crypto-asset for trading, CASPs must assess:

Technical security of the token
Issuer’s reputation and track record
Whether the asset was involved in fraud or illegal fundraising
Features resembling securities or derivatives

SEC approval is required before listing, and may be revoked anytime in the interest of investor protection.

Safeguards on Custody and Client Protection

1. Segregation of Assets

Client crypto-assets must be legally and operationally segregated from the CASP’s own assets.

2. No Proprietary Use

CASPs are prohibited from using client assets for proprietary trading, unless authorized and with express consent.

3. Custodial Standards

Required to implement robust custody and cyber protection systems.

Cybersecurity and System Integrity

Mandatory secure authentication, encryption, system logs, and audit trails
Regular penetration testing, vulnerability assessments, and third-party audits
Must establish a local data center; foreign outsourcing allowed only under strict conditions

Client Suitability, Disclosures, and Complaints

CASPs must assess a client’s financial literacy, investment experience, and risk tolerance
Required to implement transparent disclosures and provide accessible dispute resolution
Must reject users deemed financially unsuited to engage in crypto investing

Fees and Penalties

Registration Fee

₱50,000 upon filing of application

Supervision Fee (Per Semester)

Revenue Bracket	Rate
First ₱2B	1/300 of 1%
Next ₱2B	1/200 of 1%
Over ₱4B	1/100 of 1%

Penalties

Violation Instance	Penalty
1st	₱50,000 per offense
2nd	₱100,000
3rd+	₱200,000 + possible cancellation of registration

Late Filing

₱10,000 basic fine plus ₱500 per day of delay

Grounds for Suspension or Revocation

Failure to comply with CASP rules or AML laws
Non-use of license within 12 months
Engagement in fraud or illegal solicitation
False representation or submission of misleading documents
Unqualified audit opinion or security breaches
Renunciation of license or violation of the Securities Regulation Code

The SEC also reserves the power to issue confidential suspension orders, direct asset liquidation, or order trading halts in critical cases.

Reportorial Compliance Requirements

Monthly Reports

Financial statements
Off-balance sheet exposures
Wallet addresses and related-party transactions

Quarterly Reports

Board minutes
Strategic plans
Risk exposure summaries

Annual Reports

Audited AFS and full compliance documentation
Internal control evaluations and product summaries

Retention Period: Five (5) years for all user, system, and trading data.

Implementation and Oversight

The PhiliFintech Innovation Office (PhiliFINNO) will supervise and implement the guidelines under the SEC.
The guidelines will take effect 30 days after publication in two newspapers of general circulation.

Legal and Financial Implications for Philippine Entities

For Corporate Groups

Entities offering digital assets must restructure if their corporate purpose does not include CASP-related activities.
Holding companies or fintech aggregators may consider subsidiary formation to ring-fence crypto risk.

For Legal Compliance Teams

Must review existing KYC, AML, and cyber controls
Legal teams must prepare SEC registration kits, Board Resolutions, and internal policies in advance

For Investors and Users

This regulation empowers users to demand higher accountability from platforms
Raises the bar for transparency and consumer protection in crypto investing

Final Thoughts

SEC MC No. 5, s. 2025 is a landmark policy that redefines how crypto businesses must operate in the Philippines. It is a leap toward institutionalizing digital asset markets under the rule of law—creating safer, fairer, and more credible crypto ecosystems for Filipinos.