Crypto exchanges to be inspected

THE Cagayan Economic Zone Authority (CEZA) said on Tuesday it would subject the 25 cryptocurrency exchanges it planned to issue licenses to operate in the ecozone to a strict probity and integrity check.

In a statement, CEZA Administrator and CEO Raul Lambino said if these exchanges would hold their initial coin offerings (ICOs), his agency would have to see if these were asset-backed.

“If they offer in the market their initial (digital) coin, they may be able to convince 50 unsuspecting investors and promise them the sun and the moon. This is a Ponzi scheme. We are not going to allow it,” he added.

The Investopedia website defines this scheme as a “fradulent investing scam promising high rates of return with little risk to investors” and “generates returns for older investors by acquiring new investors.”

Each crypto exchange was required to invest $1 million (P53.47 million) within two years of operations—a move, Lambino said, aimed to prevent the country from becoming a scam haven.

“There are many operating scammers who put [up] an exchange with very little capital and they are victimizing investors. We do not want the Philippines to be a haven (for scammers), even if these scams are happening abroad,” Lambino said.

“[T]hrough our probity and integrity check, we can determine if their transactions are just designed to entice unsuspecting people to invest in Bitcoin or whatever” fradulent cryptocoin, he added.

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The inspection will continue, even if the exchanges already got their licenses, which are provisional, according to the CEZA chief.

“We can determine within three months [to] within two years if their operations [are] not up to par,” Lambino said.

“[ W]e have also partnered with a company that will adopt central auditing,” he added.

Offshore companies eyeing to do business at the ecozone should establish their back offices in the country and have their branches registered with the Securities and Exchange Commission ( SEC), the official said.

“If they are going to do any hankypanky in the country, we can go after them (principal companies),” he added.