CEZA awards first offshore cryptocurrency exchange license to HK firm

Cagayan Economic Zone Authority (CEZA) has awarded a license to Golden Millennial Quickpay, Inc. Ltd. of Hong kong, the first of 25 principal licensees it intends to approve as offshore cryptocurrency exchanges.

CEZA Senior Deputy Administrator Raymundo T. Roquero said that CEZA is going to earn R3.6 billion in one time fee alone from the principal licensees, which are allowed to grant four sub or regular licensees.

A principal licensee is required to pay a total of $360,000 while its regular licensees will have to pay $85,000.

Roquero explained that the license allows Quickpay to operate as an offshore cryptocurrency exchange and for its back office, servers and data center to be located in CEZA.

Roquero said they intend to approve the four regular licensees of Quickpay in three months. Quickpay’s provisional approval is good only for 6 months until it can fulfill all the requirements although it has already passed some stages of probity and integration.

On top of the fees, a principal licensee is also required to invest $1 million over a two-year period and there are milestones that it has to fulfill.

CEZA will also get a share of the cryptocurrency exchange transaction or 0.1 percent of transaction fee.

CEZA Corporate Board Secretary Catherine Joy Alameda explained that the offshore exchange enables the conversion of crypto to fiat (dollars, peso, yen, yuan) or crypto to crypto currency (bitcoin, ethereum). The offshore exchange, as the name suggests, cannot accept local IP addresses, meaning all transactions are foreign and no Filipinos are allowed to engage in any trading activities at the exchange.

Alameda said that cryptocurrency exchanges are interested in CEZA because of the ecosystem at CEZA, being a government agency. There are very few countries in the world that regulates cryptocurrency exchanges. This prompted fintech companies to look for jurisdiction that enables their operations and CEZA is one capable jurisdiction.

Since CEZA is a government owned agency, these cryptocurrency exchanges are more secure to register with them and operate offshore. They are not also under the jurisdiction of the Bangko Sentral ng Pilipinas because they are offshore. BSP has yet to come up also with regulations on cryptocurrency exchanges.

This makes these offshore exchanges secure in its contract because CEZA in effect is a state-sanctioned agency. These exchanges are allowed to hold a back office, data center and servers at CEZA.

For now, Quickpay is located in Sta. Ana, Cagayan, using LR Data, an internet service provider at CEZA, but once the facilities at the fintech hub are completed they will relocate inside the hub and link up all their systems with CEZA. Already, 70 fintech companies are lining up for registration with CEZA.

As the first fintech solution and offshore virtual currency licensee, the company held its 2018 GMQ Global Blockchain Summit Philippines on Tuesday at the Sofitel Hotel.

In his speech, CEZA Administrator and CEO Raul L. Lambino said that its charter has put them in a perfect position to create this Fintech hub that shall produce financial products relating to blockchain, cryptocurrency exchanges, initial coin offerings, payment solutions, cloud computing, big data, artificial intelligence, roboadvice, and other financial technology solutions.

“Our goal is to push the logical progression of these technologies into the mainstream, so that transactions that are mediated by them will be fail-safe, will be secure, and will be easier and faster,” said Lambino. (BCM)