Popular online play-to-earn company Axie Infinity or Sky Mavis is not registered as a corporation with the Securities and Exchange Commission nor does it have a license to sell or trade securities in the Philippines.
“The SEC has received numerous inquiries regarding Axie Infinity as well as other play-to-earn platforms and schemes. This has been a topic of discussion within the PhiliFintech Innovation Office (PIO) and other operating departments,” the SEC informed Business Bulletin.
With that, “We are currently investigating regulatory touch points and studying its economic impact and risk exposure to Filipinos.”
Axie Infinity is an adventure online game developed by Vietnamese studio Sky Mavis. It is a blockchain game whose popularity rose exponentially in the country amid the pandemic, allowing players to earn in-game cryptocurrencies that could then be traded and exchanged to pesos.
But to play the game, players need first to purchase three digital pets called “Axies,” which they will breed and hatch offspring characters that will flight on the battlefield. Completing the battle has rewards in the form of cryptocurrencies.
Per verification with the SEC’s database, the Commission said “Axie Infinity or Sky Mavis is not licensed to do business in the Philippines as a branch, regional area/operating headquarters or a representative office.” “It also does not possess any secondary license to conduct any regulated activity within the Philippines,” the SEC said.
The commission warned that, “The public is always reminded to be vigilant, if not, avoid transacting with entities without any primary registration or licenses to do business in the Philippines in order to avoid losing their hard-earned money.”
The SEC said it is clear that the Commission has jurisdiction over digital assets classified as securities.
“The Securities Regulation Code is clear as to what constitutes securities. Moreover, Philippine case law is clear as to what constitutes an investment contract,” it added.
Thus, in its advisory dated January 8, 2021, “the Commission stated that some of these new virtual currencies, based on the facts and circumstances surrounding their issuance, follow the nature of a security as defined by Section 3.1 of the Securities Regulation Code (SRC).”
Also, “when a virtual currency is likewise analogous to any of the types of securities under Section 3.1 of the SRC, there is a strong possibility that the said virtual currency is a security under the jurisdiction of the SEC and has to be registered and necessary disclosures have to be made for the protection of the investing public.”
In order to ensure that investors are duly protected, the SEC’s policy is to inform and warn the public about trending and dangerous investment schemes and confirmed scams through periodical issuances of Public Advisories for the protection of Filipinos.
“When the Commission determines that an illegal investment activity has the tendency to cause grave and irreparable injury to the investing public, the SEC issues Cease-and-Desist Orders to order these entities to stop engaging in these illegal activities under pain of contempt,” it explained.
The SEC can also impose fines and penalties to erring companies and files criminal cases against those who are patently engaged in investment scams.
It also conducts regular investment education activities to teach the public on what to do when there are investment opportunities being offered so that they can avoid potential investment scams and prevent the loss of their hard-earned money.