New to this series? This is Part 2 of a three-part series on Philippine crypto regulation. Part 1, "The CASP Rules Are Here. Now What?", covers the current regulatory landscape: the SEC CASP Rules (MC Nos. 04 and 05, Series of 2025), the BSP VASP framework under Circular 1108, the indefinite licensing moratorium, and the dual-licensing problem that sits at the center of Philippine crypto compliance today. Reading Part 1 first provides useful context, but this article also stands on its own.

In mid-2021, millions of Filipinos were playing a blockchain game to pay rent.

This is not a metaphor. In places like Nueva Ecija, Cavite, and Cabanatuan, where pandemic lockdowns had collapsed employment almost overnight, Axie Infinity became a primary income source for households that had no other immediate alternative. The game's in-game currency, Smooth Love Potion (SLP), could be earned through daily play and converted to pesos through local exchanges. For a period of several months, the math worked. Players earning 150 SLP per day, at peak token prices, were generating income that compared favorably to the national minimum wage (Forkast News, 2021).

Then it stopped working. And when it did, there was no regulatory mechanism in place to warn players that it was coming, to require the platform to disclose the structural risks of its economy, or to protect the income-dependent users who had the most to lose.

The Axie collapse is the most important consumer protection case study in Philippine crypto history. The question worth asking in 2026, three years after the crash and months after the most significant regulatory framework the country has produced, is whether that lesson has actually been learned.

The Scale of What Happened

At its peak, Axie Infinity drew 2.7 million daily active users globally, with approximately half of those players based in the Philippines (Philippine Daily Inquirer, 2023). This was not a casual gaming audience. Many players operated under the scholar-manager structure, in which experienced players (managers) with existing Axie NFTs would lend their assets to new players (scholars) who could not afford the entry cost, in exchange for a percentage of SLP earnings. Scholars typically received 50 to 60 percent of daily earnings (Zipmex, 2026). Organizations like Yield Guild Games formalized this structure at scale, explicitly prioritizing scholarships in "emerging economies where job opportunities are lacking and government relief has been limited" (Gulf News, 2023).

This was not simply gaming. It was an unregistered income-distribution platform built on a speculative token economy, operating at the scale of a significant labor market segment, with no regulatory oversight and no disclosure obligations.

By November 2021, research firm Naavik had already identified the structural problem: SLP supply was growing faster than demand, and earnings for Axie scholars had fallen below the Philippines minimum wage before the public collapse had even fully registered (TIME, 2022). The token's value peaked at approximately 20 pesos per SLP before falling to 0.16 pesos, a decline of over 99 percent from its February 2022 high (Philippine Daily Inquirer, 2023). By spring 2022, the bottom had fallen out entirely.

In March 2022, the harm compounded. Hackers exploited a vulnerability in the Ronin Network, the blockchain bridge that enabled players to transfer assets in and out of the game, stealing approximately $615 million in Ethereum and USDC in one of the largest crypto thefts ever recorded (CNBC, 2022). The breach had gone undetected for six days, discovered only when a user reported being unable to withdraw funds (Halborn, 2022). Users who had assets on the Ronin bridge at the time of the hack had no warning, no withdrawal option, and no insurance.

The human outcome was documented across Philippine media. Scholars abandoned the game and shifted to gig work as delivery riders. Managers who had invested in Axie teams as a business were left with illiquid NFT assets and significant losses. The players "motivated purely by financial rewards," as YGG Philippines manager Luis Buenaventura noted, had already moved on, but not without cost (Gulf News, 2023).

What the Regulators Did, and Did Not Do

During peak P2E adoption in mid-2021, both the BSP and the SEC were publicly aware of Axie Infinity's scale in the Philippines. Their response was deliberate non-engagement.

In September 2021, the BSP confirmed that it did not consider Axie Infinity a virtual asset service provider and was not yet requiring it to register. BSP Technology Risk and Innovation Supervision Department Director Melchor Plabasan said plainly: "We are not yet requiring Axie Infinity to register with the BSP." The central bank was studying whether the payment component of SLP transactions might eventually require classification as an operator of payment systems (BitPinas, 2021a).

The SEC's posture was similar. In August 2021, the SEC reminded the public to remain vigilant when transacting with entities without primary registration, and noted that it had jurisdiction over digital assets classified as securities. It did not classify SLP or AXS as securities at that time, and it issued no platform-level requirements for Axie Infinity (BitPinas, 2021b). Axie Infinity's co-founder Aleksander Larsen responded to SEC scrutiny with a single tweet: "We are not trading securities" (BitPinas, 2021b).

The Department of Finance noted in August 2021 that P2E income was taxable, but with no registration framework for the platform and no classification guidance, enforcement was impossible (Asia Business Law Journal, 2025).

Both regulators were operating rationally within their existing mandates. The BSP's framework covered licensed VASPs; Axie was not one. The SEC's jurisdiction covered securities issuers; SLP had not been classified as one. The problem was not regulatory negligence in isolation. It was that the regulatory architecture had no mechanism for capturing a new category of income-dependent crypto use that fit neither existing definition.

Millions of Filipinos fell through that gap.

Why the CASP Rules, Good as They Are, Leave This Gap Open

The SEC CASP Rules issued in May 2025 (SEC MC Nos. 04 and 05, Series of 2025) represent meaningful progress on the consumer protection front. The rules introduce fund segregation requirements, mandatory disclosure documents before any public offering, and marketing restrictions that limit promotion to registered entities (Lexology, 2025). The Manila Bulletin noted that the SEC explicitly aims to "eliminate fraudulent schemes, wash trading, and rug pulls that have victimized Filipinos in the past" (Manila Bulletin, 2025).

These provisions would have helped in 2022. Disclosure documents would have required some acknowledgment of the risks of SLP's tokenomic model. Marketing restrictions would have limited the viral growth of the scholar-manager ecosystem through unregulated social media recruitment. Stronger custody, operational-risk, and incident-disclosure expectations would also have given users a clearer view of bridge and platform risks before they placed value inside the ecosystem.

But the CASP Rules, as written, govern crypto-asset service providers as defined in the circular: exchanges, custodians, brokers, and trading platforms offering crypto-asset services (Global Legal Insights, 2025). A P2E game platform that issues in-game tokens, operates a scholarship economy, and functions as a primary income source for hundreds of thousands of Filipinos does not fit cleanly within that definition.

The CASP Rules contain no specific provisions for income-dependent crypto use cases. There are no requirements for P2E platforms to disclose the structural mechanics of their token economies to players who treat in-game earnings as wages. There are no obligations to notify users before making economic changes to in-game token generation. There is no scholar-manager structure registration requirement. There is no reserve requirement for in-game token redemption.

If a platform structurally identical to Axie Infinity launched in the Philippines tomorrow, the CASP Rules would govern it only to the extent that it meets the definition of a CASP under the circular. Whether it does depends on a classification determination that has not been made.

The Structural Problem Behind the Gap

The consumer protection gap is not primarily a drafting failure. It is a symptom of the jurisdictional ambiguity identified in Part 1 of this series: two agencies with distinct mandates governing overlapping terrain without a shared classification framework.

A P2E platform sits at the intersection of gaming regulation, virtual asset regulation (BSP, if tokens are classified as virtual assets), and securities regulation (SEC, if tokens are classified as securities). The Axie experience showed that regulators will default to "not yet" when a new category does not fit existing definitions, and that "not yet" has real consequences for real users.

The BSP moratorium on new VASP licenses (extended indefinitely in August 2025) means that even if a new P2E platform sought BSP classification as a VASP, it could not obtain a license under current policy (BitPinas, 2025). The CASP Rules provide a registration pathway through the SEC, but only for entities that fall within the CASP definition. The gap between those two frameworks is where the next Axie Infinity will operate.

What Genuine Consumer Protection Would Require

Addressing the specific harm profile that Axie exposed requires going beyond exchange-level regulation. The following are not proposals in the abstract. They are the provisions that, if they had existed in 2021, would have materially reduced the harm that Filipino users experienced.

Mandatory tokenomic risk disclosure. Any platform that issues in-game tokens with real monetary value must provide users with a plain-language explanation of how token supply is generated, what factors affect token value, and what mechanisms exist to manage supply. This is not technically different from the disclosure requirements in the CASP Rules. It would simply extend them to cover token-issuing game platforms.

Scholar-manager structure registration. The scholarship model created a labor-like relationship between managers and scholars, with no legal framework, no dispute resolution mechanism, and no liability for managers when token values collapsed. A registration requirement for entities operating scholarship structures above a certain scale would bring this activity within regulatory visibility.

Pre-change notification requirements. Sky Mavis adjusted in-game SLP earning rates in August 2021 without formal user notification, a change that directly affected the income of hundreds of thousands of Filipino scholars (Forkast News, 2021). A requirement to provide 30 days' notice before making material changes to token generation mechanics would give income-dependent users time to adjust.

Platform reserve requirements for token redemption. If a platform offers in-game tokens that can be converted to fiat, it should maintain reserves sufficient to honor reasonable redemption demand. This follows the same consumer-protection logic behind reserve and backing requirements for fiat-referenced digital assets, adapted to the P2E context.

None of these requirements are technically novel. They are adaptations of existing regulatory principles, applied to a use case that the Philippines has more experience with than any other jurisdiction in the world.

Conclusion: The Philippines Has Standing to Lead Here

No country has produced more data on the real-world consequences of unregulated P2E adoption than the Philippines. The scholar-manager economy, the rural income dependency, the tokenomic collapse, and the Ronin hack all played out here at a scale that no other jurisdiction experienced.

That experience is not only a cautionary tale. It is a source of regulatory standing. The Philippines has the institutional knowledge, the documented harm record, and the lived practitioner experience to develop the world's first meaningful P2E and GameFi consumer protection framework. No other jurisdiction is better positioned to lead on this specific question.

The CASP Rules are a strong foundation for exchange-level regulation. What they do not yet address is the income-dependent user, the informal scholarship economy, and the token-issuing game platform. These are not edge cases in the Philippine context. They are the reason the Philippines became a global case study in the first place.

Part 3 of this series lays out a full five-point regulatory agenda, including a proposed P2E sub-framework, that Philippine regulators and practitioners could credibly advocate for in 2026.

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