The government of the Philippines has announced that it will now allow ten cryptocurrency companies to operate in a Special Economic Zone in Cagayan.
According to the statement issued April 25, 2018, firms can not only operate under liberal regulations within economic zones but also avail several tax incentives provided by the government to boost job growth in the country.
Cagayan Special Economic Zone
Raul Lambino, head of the Cagayan Economic Zone Authority (CEZA) which operates the economic zone, said, “We are about to license ten platforms for cryptocurrency exchange.”
Companies inside economic zones can be involved in any aspect of cryptocurrency business, including commercial mining, providing blockchain technology-based financial services and hosting Initial Coin Offerings. Companies operating a cryptocurrency exchange, however, will be forced to trade the fiat into digital currency at an offshore location to comply with the new regulation.
CEZA first began drafting rules for blockchain and cryptocurrency companies in February 2018. Prior to that, technology businesses and startups that wanted to apply for a license to work in economic zones had to show plans to invest at least $1 million within two years and pay up to $100,000 annually as licensing fees.
The authority is a government-owned and controlled corporation tasked with the management of the Cagayan Economic Zone. The creation and operation of economic zones in the Philippines are regulated in accordance to the Cagayan Special Economic Zone Act of 1995.
Cryptocurrency Regulation in the Philippines
On January 29, 2018, the Philippines Security and Exchange Commission had announced that it would be developing new laws and regulations for cryptocurrency trading. The SEC said there was a need for better clarity on cryptocurrency trading as well as to protect investor money.
SEC commissioner Emilio Aquino said that a final version of these laws would be available by the end of 2018:
“We need to act because initial coin offerings (ICOs) are sprouting especially in 2017. We want to come up with our own set of regulations.”
The Philippines Central Bank is now in the process of reviewing applications sent by companies looking to set up cryptocurrency exchanges in the country. Given that operators can now choose to register in these SEZ, they can also benefit from tax breaks being provided by the government.
What this means for the Crypto Industry in the Philippines
The Philippines was one of the earliest regulators of bitcoin. The decision to grant legal status to 10 digital companies from the cryptocurrency and blockchain industries could prove to be a major stepping stone for the ecosystem. In 2017, Japan had also laid down key laws for cryptocurrency exchanges operating in the country. On the other hand, though, some Asian countries have adopted a more cautious approach to the issue.
BSP core IT Chief Melchor Plabasan, however, said, “We do not endorse virtual currency as a currency because it is not a currency. We only regulate bitcoin or virtual currencies when it is used in delivering financial services like remittance and payments.”