Sun.Star Pampanga

SEC warns public versus investing in virtual currency

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MANILA -- The Securities and Exchange Commission (SEC) has cautioned the public about risks of investing in virtual currency.

In an advisory, the SEC Enforcemen­t and Investor Protection Department underscore­d the need for them to take the necessary precaution­s in dealing with initial coin offerings (ICO) entities.

“If a promoter, issuer, broker or salesman guarantees returns, if a potential investment sounds too good to be true, or if you are pressured to act hastily, please exercise utmost caution and diligence and be wary of the risk that your investment might be lost,” it said.

The SEC issued the warning after detecting that certain companies, individual­s or groups of persons were luring the public, either through popular social media platforms or through their own independen­t website, to participat­e in socalled ICO and to purchase the correspond­ing virtual currency.

An ICO is the first sale and issuance of a new virtual currency to the public usually for the purpose of raising capital for start-up companies or funding independen­t projects.

In an ICO campaign, a percentage of the total available virtual currency is sold to interested buyers in exchange for fiat currency, another virtual currency, or another asset or security.

Virtual currency refers to a digital representa­tion of value issued and controlled by its developers and used and accepted among the members of a specific community or users.

The SEC said that while some of these new virtual currencies followed the nature of a security as defined by the Securities Regulation Code (SRC), these were neither guaranteed by any Central Bank nor backed by any commodity unlike ordinary securities.

It said a security included an investment contract which referred to a contract, transactio­n or scheme whereby a person invested his money in a common enterprise and led to expect profits primarily from the efforts of others.

The SEC further said there was a strong possibilit­y that the virtual currency was a security under the jurisdicti­on of the Commission when it was analogous to any of the types of securities under Section 3.1 of the SRC.It thus has to be registered and necessary disclosure­s have to be made for the protection of the investing public, it added.

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