Lambino says crypto exchanges locating in CEZA up for ‘probity and integrity’ check CEZA to prevent PH from becoming haven for ICO scams

As the rush to locate in the Cagayan Economic Zone Authority (CEZA) heightened since a month ago, Secretary Raul L. Lambino, CEZA administrator/CEO, has assured putting a stringent check on the “probity and integrity” of 25 crypto exchanges.

He said CEZA will be issuing only 25 licenses initially to the exchanges that plan to locate in the zone and operate from the Philippines, to possibly launch their initial coin offering (ICO) for investment and trading in cryptocurrency, or digital money.

Each of the exchange were required to put in an initial investment of US$1 million (over P53 miilion) in a two-year span, he told journalists at the twin Global Blockchain Summit and Inaugural Blockchain Application Exhibition on June 24 at Marriot International Halll in Pasay City.

Officials from the United Nations, international experts and scholars on the emerging blockchain technology participated in the summit. It was hosted by the Global Blockchain Association Research Foundation (GBARF) and the GOBA Foundation, and organized by Lailook Finance.

So, what’s in it for the Philippines, the coming of cryptocurrency and fintech companies?

“Actually, we are going to make money because we are going to charge them for occupying the spaces we constructed,” said Lambino. He was referring to the various CEZA offices in Metro Manila to be rented out the to BPO offices of the offshore cryptocurrency companies.

At present, he said they will only issue an initial 25 principal licences, but each exchange may have sub-licenses of as many as 20 to 30 traders or brokers.

After issuing the licenses, he said CEZA will stop to observe how the exchanges will operate.

“If they have ICO we will have to find if their ICO is asset-backed because this what we are saying that there are many scammers. if they offer in the market their initial (digital) coin, they maybe able to convince 50 unsuspecting investors and promise them the sun and the moon. This is the Fonsi Scheme. We are not going to allow it.”

To protect citizens of the Philippines from Fonsi scams, he said, no one will allowed to invest or trade in the ICOs by blocking the IP addresses of the exchanges.

At the same time, the CEZA head said it is another matter if Filipinos go to Hong Kong or other countries to trade in exchanges of which the authority has no more control.

“In our system, no residents of the Philippines will be able to enter because we are going to block their (exchanges’) IP address. We are going to block them. You cannot enter the IP, you cannot invest.”

Lambino said the rules being formulated only the principal licensee can issue an ICO because a company needs multi-million dollars of investment for the exchange.

“There are many operating scammers who put an exchange with very little capital and they are victimizing investors,” he pointed out.

“We do not want the Philippines to be a haven (for scammers) even if these scams are happening abroad. That’s why through our probity and integrity check we can determine if their transactions are just designed to entice unsuspecting people to invest in Bitcoin or whatever crypto coin that is a fraud,” he said.

It can be recalled that Bitcoin was the first digital money that came out with the innovative blockchain technology developed in 2009 by a supposed Japanese technology guru who is popularly known as “Satoshi Nakamoto” though his real identity — whether he is alone or a group — is still uncertain.

At present there are over 1,000 digital coins because various sectors — fintech or not — are also introducing their cryptocurrency.

Lambino said that CEZA’s probity and integrity check is a continuing process even if the exchanges have already gotten their license, which he said is always a provisional license.

“So, we can determine within three months (of operation), within six months, within a year, within two years if their operation is not up to par. We will revoke it because we also have our central auditing platforms.

“Other than the marketing probity and integrity checking to be done by our partner companies, we have also partnered with a company that will adopt central auditing,” he assured.

The CEZA administrator revealed that among the measures being put in place to prevent scams from happening is the requirement for all the offshore companies intending to locate at the economic zone to establish their back offices in the country and put their branches that must be registered with the Securities and Exchange Commission (SEC).

“If they are going to do any hanky-panky in the country, we can go after them (principal companies) because this is continuing under international law.”

Lambino said that before they will their license the authority will be able to determine the personalities behind each company, their background, how did they setup a company doing the exchange operation. That is where the probity and integrity check will come in.

Lambino spoke at the blockchain summit, saying part of the reason he accepted the organizers’ invitation was to know more about them. “I am going to observe how credible these guys are.”

In his eight-page speech filled with reference to blockchain and its potentials to change the way people do business, he assured CEZA’s readiness to host technology companies.

“CEZA is offering to the world a haven for financial technology (fintech) innovations to grow. We are going to be partners in building the future of fintech in the heart of CEZA,” he said in front of hundreds of foreign delegates from China, Hong Kong, Korea, Malaysia, Singapore and other countries.

He described blockchain as “a network of decentralized nodes that keeps an accurate record of data that cannot be altered. it revolutionizes the way transformation is stored and the way transactions occur.”

Lambino mentioned some of blockchain’s benefits: ensures speed, lower costs, security, accuracy, and elimination of central points of system attacks and failures.

“I a few minutes, all the transactions conducted are verified, cleared, and stored in a block which is linked to other blocks, thereby creating a chain.”

CEZA is looking forward to what could be just an initial P2 billion investments in two years’ time from the offshore fintech firms operating blockchain and cryptocurrency.

He was optimistic the Cagayan Special Economic Zone and Freeport (CSEZFP) would realize its being a sanctuary for the 25 offshore companies that hat signed with CEZA.