Only one spot left before the Philippine government-owned Cagayan Economic Zone Authority (CEZA) reaches the original limit it set for cryptocurrency licenses.
CEZA chief Raul Lambino confirmed on the sidelines of the ASEAN Gaming Summit 2019 in Manila last week that the investment promotion agency has issued 24 principal licenses and six regular licenses for cryptocurrency exchanges, as well as four licenses for 15 companies involved in financial technology solutions.
“These 24 companies, these are principal licenses that are committing to invest at least $1 million for facilities that they are going to construct inside the economic zone,” Lambino told CoinGeek.com. “The regular licenses are some sort of sublicenses under the principal licenses; they can operate their own exchange but they have to be under their own principal licenses.”
CEZA announced back in July its plan to limit the issuance of crypto licenses to 25, with each principal license holder having 20-30 sublicenses for traders and brokers. Lambino clarified that setting a cap on licenses is a “business decision” that would be undertaken by the CEZA administrators themselves, all depending “upon the developments later on.”
He explained, “We don’t have a specific rule that we are setting a cap, it’s a business decision. If we need to set a cap, then it’s the administrators that’s going to have a say on that. It would depend upon the developments later on, like for example, there are 24 licenses now, most of them haven’t begun operating yet; they are setting up their system. I don’t know how fast they can move, and so if they won’t be able to comply within the period allowed by our rules and regulations then we will be forced to [lose] them, then we will open that slot to other interested parties.”
The economic zone has been seeing a strong demand for the cryptocurrency licenses, particularly from international operators. Recently, CEZA has signed a memorandum of understanding (MOU) with a Taiwanese company, which plans to “put up its own blockchain company or fintech platform inside CEZA.”
The MOU, according to Lambino, is the initial step for many of these companies. He said, “Initially they can sign an MOU with us, and then eventually they apply for license.”
Aside from Taiwan, companies from Japan, South Korea, Hong Kong, Malaysia, Thailand, and even Slovenia have either signed MOUs, applied or have been granted a CEZA crypto license.
In addition to investing at least $1 million over a two-year period, CEZA crypto licensees are also required to pay up to $100,000 in license fees, establish a back office in the Philippines as well as register with the country’s Securities and Exchange Commission (SEC). In exchange, the operators will get to enjoy tax breaks.
CEZA has been keen on ensuring that there will be “proper compliance by actors in the ecosystem.” In February, the economic zone rolled out its Digital Asset Token Offering (DATO) regulations covering crypto assets. Under these rules, asset-backed digital tokens will have to listed on the Offshore Virtual Currency Exchange (OVCE), and confirm arrangements with CEZA-accredited wallet providers and custodians.
Lambino noted, “We have very, very strict rules in that, and we have to coordinate with law firms or auditing and accounting firms in the country where these companies have their so-called assets that back the token they are going to offer. The requirements are very tremendous, certification of these assets existing whether these are tangible or intangible… maybe they have assets, say, a collection of best masterpieces done by Rembrandt or something like that. These are examples of assets that can be used to back the tokens that they are going to offer.”