Aiming to urge Philippine policy makers to start formulating the terms on how blockchain-related trades and business transactions, especially with the advantages of the emerging security token offerings, Japanese Minister of State for Science and Technology Policy Naokazu Takemoto and Secretary Raul Lambino of CEZA recently discussed the future of financial technology businesses in the country and the Asian region.
The meetup is on the heels of the upcoming revision of the Payment Services Act and the Financial Instruments and Exchange Act of Japan by Q2 of 2020. Astm the current administrator and CEO of the Cagayan Economic Zone Authority (CEZA), Lambino expressed the need for urgency for a set of rules and regulations or a defined law that would help the Philippines become more competitive in this field of finance.
Security token offerings or STOs are digitalized securities such as stocks, bonds, and equity interests in funds that use blockchain technology as its main platform. As Minister Takemoto mentioned that ‘security’ in STO is not the same as cybersecurity and computer securities, and instead, in the sense of assets or digital securities issuance to raise funds through the blockchain. Through this, people will be able to participate in the investment process even for small-scale investments.”
Over the course of the previous two to three years, European US-based companies have introduced various businesses service delivery models that linked to STO financing and associated blockchain technologies and platforms. Along with this is the creation and implementation of rules and regulations, even laws within their jurisdictions, surrounding the development, use, and exchange of these virtual currencies. Last year, STOs also attracted a lot of attention in Japan, which led five major securities companies including SBI, one of the largest FinTech companies in the country, to establish the Japan STO Association in October 2019.
“STO is now becoming a worldwide funding method of financing, but the STO market in Asia, including Japan, has just begun to develop. To achieve the philosophy of ‘enhancing financial markets and enriching the economy by using technologies to benefit the entire population,’ cooperation between financial systems and technologies among Asia countries is essential and must be considered,” explained Minister Takemoto.
Three years ago, CEZA launched its “Crypt Valley of Asia” initiative, with the goal of providing a stable and safe region for blockchain developers and cryptocurrency exchange operators to domicile their back office support infrastructure. It currently has 25 licensee companies from all over Europe and Asia, including Japanese developer ALLEX, a security token issuer that provides solutions on exchanges including management, settlement, and related operations. Its security token ST20 or the ALLEX token complies with the JP standards of KYC/AML (know your customer/anti-money laundering) that protects the users, investors, and the issuer company from scams and fraud.
Despite being developed in the country, Filipinos unfortunately cannot enjoy using ALLEX or any other security token because of the absence of laws that would allow it. “Congress needs to enact laws surrounding STOs and virtual currencies, and appoint a particular government agency to have jurisdiction to supervise the implementation of this. If not, we, particularly the CEZA, will end up being a mere host for back offices or business processing office (BPO) for foreign fintech companies while all the buying, trading, and offering payments will be done offshore,” Secretary Lambino emphasized.
In the meantime, ALLEX still will play an influential role in helping to train Philippine blockchain developers in how to create security tokens. This Japan-Philippine technology and knowledge transfer is one of the economic benefits of having foreign back office support within CEZA.
Compared to neighboring countries such as South Korea, Singapore, Hong Kong, and Japan who are now actively setting up their rules and regulations for virtual currency exchanges, Lambino and Takemoto are hopeful that the Philippines will follow suit and catch up.
Aside from modernizing the country’s financial landscape, establishing clear-cut rules and regulations on security tokens and cryptocurrencies in the Philippines will also help grow the economy by attracting more investors and providing more jobs for Filipinos.
“This matter is unstoppable. It’s now being practiced and accepted by many jurisdictions, including the US, and this new idea of putting up security tokens, which are asset-backed and completely different from the initial utility tokens, will be, I think, the answer to the problems of scams or fraudulent activities regarding this new dimension of business,” Secretary Lambino concluded.
I am Karina Ramos, a mom of three amazing kids. I am fascinated with almost every aspect of life, especially technology.