Key takeaways
The CASP Rules provide for the definitions of key terms such as crypto-assets, crypto-asset securities, crypto-asset service providers, and the scope of crypto-asset services.
The new framework mandates that all CASPs must be corporations registered with the SEC, with a minimum paid-up capital of PHP 100 million (excluding crypto-assets), and must maintain a physical office in the Philippines. Registration requires submission of extensive documentation to the SEC's PhiliFintech Innovation Office. While exemptions from registration may be granted under certain conditions, all CASPs are subject to registration and supervision fees based on their gross revenue.
Public offerings of crypto-assets and crypto-asset securities are subject to disclosure and registration requirements, with specific exemptions outlined under the CASP Rules.
Marketing of crypto-assets and related services is restricted to registered entities, although CASPs may engage third-party marketers with proper disclosure to the SEC.
Noncompliance with the CASP Rules and CASP Guidelines carries significant penalties, including fines, imprisonment, and potential cancellation of registration for repeated violations. These measures reflect the SEC's commitment to regulating the crypto-asset sector with a focus on transparency, accountability and investor protection.
Quisumbing Torres is able to advise on the regulatory requirements under the CASP Rules and CASP Guidelines, and assist in assessing existing procedures and policies, with a view to ensuring compliance.
In more detail
Below are the salient provisions of the CASP Rules and CASP Guidelines:
1. Coverage and applicability
The CASP Rules and CASP Guidelines shall apply to all CASPs that are offering crypto-asset services and third-party service providers who engage in the marketing of crypto-assets and crypto-asset services.
A crypto-asset refers to a cryptographically secured digital representation of value or of a right that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions that can be transferred, stored or traded electronically. On the other hand, crypto-asset services refer to any or more of the following services and activities in relation to any crypto-asset: offering crypto-assets to the public; operating a crypto-asset trading venue; crypto-asset intermediation activities; and other services related to crypto-assets that may be determined by the SEC.
2. CASP registration
No CASP shall be registered unless it complies with the following requirements:
- The applicant must be a corporation registered with the SEC.
- The operation of a CASP must be included in the primary purpose of the corporation, as indicated in its Articles of Incorporation.
- The corporation must have a minimum paid-up capital of at least one hundred million pesos (PHP 100 million) in cash or property, excluding crypto-assets.
- The applicant must have a physical office located in the Philippines.
- The applicant shall submit a CASP Form, together with the supporting documentary requirements, to the PhiliFintech Innovation Office, which include listing and delisting standards for admission of crypto-assets to trading, trading and disclosure rules, business conduct rules, written descriptions of the software system or program used, description of the custodian or registrar of the crypto-assets to be traded in the system, a risk disclosure matrix discussing the risk factors involved in the operation of the platform, and a business plan, among several others.
3. Exemption from registration
The SEC, by an order, after an application for exemption from CASP registration has been filed, may grant such exemption after determining that said order is consistent with the public interest and the protection of investors.
4. Public offering of crypto-assets in the Philippines
Crypto-assets shall not be sold, offered for sale, or distributed in the Philippines without complying with the following:
- A disclosure document relative to a crypto-asset to be offered in the Philippines must be filed by the offeror with the SEC and published on the platform's website, social media account, and other means of communication not less than 30 days before any marketing activities or the actual offering, whichever comes first.
- The disclosure document shall include the following information: information about the offeror of the crypto-asset; information about the issuer of the crypto-asset, if different from the offeror; the key features, risks and prospects of the crypto-assets; rights and obligations attached to the crypto-assets (if any); an outline of the underlying technology (including any protocol and consensus mechanism); and, where applicable, details of the person who is seeking admission to trading on the crypto-asset trading venue.
Crypto-assets may be sold, offered for sale, or distributed in the Philippines without complying with the above requirements, only in the following situations:
- Crypto-assets offered for purposes other than as a financial product.
- Crypto-assets offered in a public offering of crypto-asset securities.
- Crypto-assets offered in accordance with issuances or within the regulatory purview of other Philippine regulatory agencies.
- Other crypto-assets offerings that the SEC may determine as exempt from this requirement.
5. Public offering of crypto-asset securities
Crypto-asset securities shall not be sold or offered for sale or distribution within the Philippines without a registration statement duly filed with and approved by the SEC, as provided by the Securities Regulation Code and other issuances by the SEC. Crypto-asset securities refer to a cryptographically secured digital representation of value or of a right that is being offered as securities, as defined under the Securities Regulation Code and other relevant laws and regulations that rely on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions, which can be transferred, stored or traded electronically. This includes, but is not limited to, the digital representation of securities.
Prior to such sale, information on the crypto-assets, in such form and with such substance as the SEC may prescribe, shall be made available to each prospective purchaser.
6. Marketing of crypto-assets and crypto-asset services
No person or entity shall engage in the marketing or inducement to purchase crypto-assets or crypto-asset services unless they are registered as a corporation under Philippine laws and obtain the necessary licenses from the concerned regulatory agencies.
However, a CASP may engage the services of a third-party service provider for the marketing or inducement of crypto-assets or crypto-asset services, provided that it shall disclose and submit to the SEC a list of its authorized third-party service providers that it has engaged for marketing activities.
7. Penalties
- Willful violations of the CASP Rules and CASP Guidelines — punishable by imprisonment of not less than one year, but not more than five years, or by a fine of not less than PHP 50,000.00 but not more than PHP 2 million, or both, at the discretion of the court. Further, if the violation is committed by a corporation or a juridical entity, the directors, officers, employees, or other officers who are directly responsible for such violation shall be held liable thereto.
- Penalty for late or non-filing of reports — PHP 10,000.00 basic fine, plus PHP 500.00 per day of delay.
- Penalty for any violation of the CASP Guidelines:
First instance |
PHP 50,000.00 per violation |
Second instance |
PHP 100,000.00 per violation |
Third instance and onward |
PHP 200,000.00 per violation, and cancellation of registration |
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