The Philippine government plans to license up to 25 cryptocurrency exchanges to operate in the country’s northern Cagayan Special Economic Zone and Freeport, increasing the number from an initially planned 10.
“Each exchange will only have sub-licenses of as many as 20 to 30 traders or brokers,” the state-owned Cagayan Economic Zone Authority (CEZA), which administers Cagayan Freeport, as the special economic zone is also known, said in a statement last week.
Legalizing & regulating crypto exchanges
In February 2017, the Philippines became one of the first countries in the world to regulate cryptocurrency exchanges, effectively legalizing such entities. CEZA stated it will strictly observe the operation of exchanges to ensure they follow the regulations.
“There are many operating scammers who put an exchange with very little capital and they are victimizing investors,” CEZA Administrator and CEO Raul L. Lambino said in the statement. “We do not want the Philippines to be a haven (for scammers) even if these scams are happening abroad.”
An initial investment of USD 1 million (PHP 53 million) within two years, as well as a back office in the Philippines will be required by exchanges seeking to obtain a license. According to the law, companies will have to hire staff locally, and CEZA plans a financial technology and blockchain university to meet the needs for specialists.
Despite the legalization of crypto exchanges, citizens of the Philippines will still be prohibited from trading or investing in Initial Coin Offerings (ICOs). The administration plans to ban the IP addresses of exchanges that offer ICO options to enforce this measure.
“We are going to block them. You cannot enter the IP, you cannot invest,” said Lambino. According to the regulations, ICOs must be “asset-backed” in order to prevent scams and Ponzi schemes.
Silicon Valley of Asia
The Cagayan administration hopes that with those policies the region will turn into the “Silicon Valley of Asia”, attracting foreign investments of USD 40 million in two years. According to the press release, “at least 21” offshore fintech companies have already signed memorandums of understanding with CEZA.
In April, Lambino uncovered plans to issue 10 licenses to crypto exchanges looking to invest in the Cagayan Freeport, saying they will come from Japan, Hong Kong, Malaysia and Korea.
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