Atty. Padilla: Blocking Binance Needs Court Order
Veteran author and prominent crypto personality in the Philippines, Atty. Rafael Padilla, author of Fintech: Law and First Principles, shared his insights and opinions on the controversial situation involving Binance in the Philippines.
In a lengthy post he first published on Bitpinas, Atty. Padilla shared his unbiased opinions on the issues involving one of the world’s most popular crypto exchanges.
SEC’s Initiative to Block Binance in the Philippines
Atty. Padilla started his editorial piece with a brief background of the situation involving Binance in the country.
The Securities and Exchange Commission (SEC) in the Philippines released a public advisory dated November 28, 2023, warning the public not to trade on Binance’s cryptocurrency exchange.
They alleged in the advisory that Binance allowed the offering of unregistered investment products such as “spot trading using leverage, futures contracts, option contracts, cryptocurrency savings accounts, cryptocurrency staking services, and a platform for initial coin offerings.”
The commission also found that Binance “has been actively employing promotional campaigns on social media to attract Filipinos to engage in investment and trading activities.”
After the initial warning, they issued a press release the following day, stating they would move forward with having Binance’s website blocked in the Philippines.
The Philippine SEC said it will request assistance from the National Telecommunications Commission (NTC) and the Department of Information and Communications Technology (DICT) to block Filipinos and Philippine residents from accessing the website.
Blocking Binance’s Access
According to SEC, blocking access to Binance in the Philippines “will prohibit users from accessing the website and its application inside the country.”
The commission also noted in the press release that the blocking is expected to take effect within three months from the issuance of the advisory.
The three-month deadline was intended “to give Filipino investors who have holdings in Binance to close their positions and take out their investments.”
Atty. Padilla’s Opinion with Binance Blocking
The veteran Filipino lawyer shared his unbiased opinions on the Binance issue and noted that without a court order, the NTC, even upon the request of the SEC, cannot legally block access to Binance or any other site or application associated with Binance. There are also Constitutional issues concerning agency-issued blocking orders.
Atty. Padilla stated that it is highly unlikely that the NTC could legally justify an order requiring internet service providers (ISPs) to block access to Binance or any other unregistered offshore exchange.
Atty. Padilla’s Supporting Cases
Atty. Padilla cited a case involving Disini v. Secretary of Justice, where the Supreme Court declared Section 19 of the Cybercrime Prevention Act unconstitutional for violating the freedom of expression and the right against unreasonable searches and seizures.
The infamous Section 19 authorized the Department of Justice (DOJ) to “restrict or block access to any computer data involved in the commission of any of the cybercrime defined under the Cybercrime Prevention Act”. According to the Supreme Court, computer data — including programs or lines of code — constitute personal property” protected from unreasonable searches and seizures, whether stored in their personal computers or the service provider’s systems.”
The Philippine Constitution requires search warrants to be issued only upon probable cause to be determined personally by a judge. However, Section 19 authorized the DOJ to effectively seize and place computer data under its control and disposition without a warrant. The Supreme Court ruled that a DOJ order cannot substitute for a judicial search warrant.
SEC, NTC & DICT Cannot Issue Blocking Orders to Enforce Securities Law
The Securities Regulation Code (SRC) did not expressly grant the SEC the authority to block access to websites or platforms where securities are sold or distributed.
While the SRC empowers the SEC to enlist the aid and support or deputize government enforcement agencies to implement the SEC’s powers and functions expressly granted by the same law, it does not automatically follow that the SEC can request the NTC to order ISPs to block Binance or any other unregistered crypto exchange’s website or application due to alleged violation of securities law.
Similarly, the Public Telecommunications Policy Act of the Philippines did not grant the NTC any authority to order ISPs to block websites from being accessed from the Philippines. As a specific exception, a law expressly granted NTC this authority but only about child pornography and other online sexual abuse or exploitation of children (OSAEC).
Lastly, the DICT Act of 2015 did not grant the DICT any power to issue a “blocking access order.”
Atty. Padilla’s Conclusion
Atty. Padilla concluded that Binance can only be blocked via court order.
The only scenario in which the SEC can successfully block Binance in the Philippines is by filing a civil or criminal case against Binance for violation of the SRC and requesting the court to block Binance’s website. In other words, they must first prove its allegations regarding Binance’s violation of Philippine securities law in court.
You can read the complete opinion made by Atty. Rafael Padilla through the official BitPinas website.
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