Gemini, the New York-based cryptocurrency exchange, has been warned by the Philippines Securities and Exchange Commission (SEC) that it is operating its newly launched derivatives exchange without regulatory authorization in the country. The SEC issued an official warning to the exchange on May 18, claiming that the exchange has no legal right to operate in the country as it has not secured approvals for its products. Breaching the country’s securities regulation comes with a 21-year jail sentence or a fine of roughly $90,000 if found guilty.
Regulatory Uncertainty for the Crypto Industry
Gemini launched its non-US derivatives platform Gemini Foundation in May, with the Philippines listed as one of the supported regions. However, the country’s regulators claim the exchange has been marketing derivatives, which are essentially considered securities in the Philippines, and has not secured regulatory approval to sell securities. The regulator advised the public to avoid investing in the exchange and halt any ongoing investments until further notice as the Gemini Foundation does not have the “necessary license and/or authority to solicit, accept, or take investments/placements from the public nor to issue securities.”
Gemini Foundation was set up to avoid regulatory uncertainty and hurdles for the crypto industry in the US. However, the Philippines’ action shows that going global comes with its own set of problems for the nascent industry. Regulation remains unclear in the country, and regulators have not been forthcoming in creating new rules for the industry.
Crypto Firms Considering an Exodus from the US
The SEC has argued in courts that current securities laws already cover most of the crypto sector and that new rules are unnecessary. However, many crypto firms disagree and are embroiled in legal battles with the SEC over its various anti-crypto positions. This has led to a growing sentiment in the crypto industry that the US may not be the place to be when it comes to setting up their businesses and projects. Many have already begun an exodus from the US and are in the process of setting up non-US entities to continue operating globally.
Some countries, like the UAE and Portugal, are accepting the crypto industry with open arms and using it as an opportunity to set themselves up as hubs. The Philippines’ warning to Gemini highlights the challenges facing the crypto industry as it navigates a patchwork of regulatory environments around the world. Gemini and other crypto firms will need to work closely with regulators to ensure that they are operating within the law and avoiding costly fines and legal battles.