In a recent revelation, Gemini, the crypto exchange has come under regulatory scrutiny in the Philippines for violating the terms set by the regulator. The Philippines Securities and Exchange Commission (SEC) has sent a notice to the exchange for operating without proper authorization.
According to the charges, Gemini has been offering and marketing securities through its Philippines derivatives exchange without bothering to register. Officials of the Philippines SEC allege that the exchange did not fulfill the required terms and operated without authorization. Reportedly, Gemini launched its derivatives-trading product in the country only on May 1.
The regulator explains that the exchange lacks the necessary license to solicit investments, accept funds from the public, or issue securities. Further, the commission warns the public to stop investing with Gemini and to cease all current investments on the platform.
Under Filipino law, crypto derivatives are counted as securities. Violating securities regulations in the Philippines can lead to severe penalties, including criminal prosecution. Conviction comes with a maximum prison sentence of 21 years or a fine of up to five million Pesos ($89,562).
However, the SEC’s action against Gemini is not an isolated incident. Regulators in other countries have taken similar steps in response to the exchange’s activities in the crypto industry.
Earlier this year, the US SEC filed a complaint against the company, alleging that their Gemini Earn program involved the offer and sale of unregistered securities. Genesis, which partnered with Gemini but then faced liquidity problems, would not allow Gemini Earn investors to withdraw all their funds which totaled some $900 million in assets from 340,000 investors.
Interestingly, in its announcement about the enforcement action against the exchange, the Philippines SEC quoted Gary Gensler, the chair of the US SEC. The regulator included Gensler’s quote which he had presented against the exchange. It said that as a “fact that compliance is not optional but a legal requirement that protects investors and builds trust.”
Additionally, in the US, the SEC was not the only regulator that cracked down on Gemini. In 2022, the US Commodity Futures Trading Commission sued Gemini alleging that Gemini provided false information to regulators during discussions over its Bitcoin futures approval.
In particular, sources suggest that the Philippines SEC also highlighted transparency concerns in regard to Gemini. The regulator has called upon anyone with information about investment solicitation activities by Gemini or its website, gemini.com, to report such activities to the Enforcement and Investor Protection Department.
Over the past months, following the collapse of the crypto exchange FTX, the Philippines securities regulator has maintained a cautious approach to crypto companies. In December last year, the regulator released an announcement stating that any enterprise wishing to conduct business in the nation must register with the SEC, the government agency reaffirmed, citing national regulations.
In August last year, the Filippino central bank decided to cancel new licenses for crypto exchanges for 3 years. It also advised individuals to avoid using foreign virtual asset service providers who are based abroad and are not authorized to operate in their country.