Special Economic Zones Offer Governments a Bridge to Smart Crypto Regulation said Jin Gonzalez, Chief Architect of Oz Finance.
There has been a spike in cryptocurrency adoption over the past two years. This has led banks and governments to rethink policies on how to approach the largely deregulated and decentralized space.
El Salvador shocked the world last September when it announced that Bitcoin would officially be legal tender, making it the first country to designate a cryptocurrency as such. The tiny Central American nation followed that up with other ambitious crypto-related goals, including a “Bitcoin City.”
However, six months after El Salvador’s bitcoin wedding, the honeymoon phase already seems to be over. While citizens and economists were enthusiastic about President Nayib Bukele’s pro-crypto initiatives, both now have a lot of criticism over how the government planned and unveiled its grand Bitcoin agenda. Impatient Salvadorans quickly grew unhappy with the government’s hasty market launch and endless technical and logistical problems. It seems that politics and expediency have prevailed over the need to conduct research carefully and formulate regulations that are realistic rather than idealistic.
El Salvador’s botched Bitcoin plan – perhaps – could be a warning or a lesson for other governments. After all, the industry is still plagued by scams and fraud, which are a big part of governments’ concerns when considering regulatory action. Just recently, two men in the United States were charged with fraud and money laundering in connection with an NFT rug draw scheme, in which they pocketed over $1 million. And that’s just one of many scams, which cost investors and users some $14 billion in 2021.
Lack of regulation
Apart from being associated with criminal schemes, the lack of clear and unified regulations in the blockchain space is also a stumbling block on the path to mainstream adoption. Yes, some crypto enthusiasts vehemently oppose regulation, but a smart industry playbook would actually be very beneficial for everyone.
Stricter regulatory guidelines, if well targeted, would have greater effectiveness in cracking down on companies and developer teams that attempt to scam investors through fraudulent token launches and other scams. Regulatory sandboxes and a clear tax regime with low rates are measures that would benefit all parties. Additionally, regulators should engage in dialogue with industry leaders, enact proportionate laws, and recognize the technological reality that blockchain offers.
Special Economic Zones
As governments watch El Salvador and consider how to regulate cryptocurrencies, special economic zones (ecozones) offer a unique opportunity to combine industry growth with local economic growth. An ecozone is a designated area within a country that falls under different economic regulations than the rest of the country. Ecozones generally provide business-friendly regulations to attract international businesses and investors.
Since ecozones already operate under their own regulations, largely independent of their host country, they can serve as a sandbox environment in which governments can experiment with innovative regulatory frameworks to determine how to regulate assets. digital and blockchain-based businesses. and activities. In this sense, ecozones would serve as a regulatory launching pad, or a siled playing field for testing regulatory regimes, ideally on the way to full regulatory control in a given country.
The United Arab Emirates and the Philippines are two examples of countries that have passed legislation that provides clear regulatory coverage for blockchain-based operations and digital assets. This path, rather than prematurely imposing a digital currency on its population, is what governments around the world should look to. With regulatory coverage, certain ecozones in these countries make it easier for companies using blockchain technology to set up shop in these business-friendly hubs.
Special economic zones: progressive regulation
In fact, in the Philippines, Oz Finance is working with an ecozone, the Bataan Freeport Zone (FAB), to enable utility through tokenization by leveraging regulations, specifically through the passage of the Law of Republic 11453. The legislation was passed by the Philippine government. , which recognized the need for progressive blockchain and crypto regulation to help usher the nation into the digital economy.
By collaborating with FAB, Oz Finance enables individuals and businesses to enjoy tax-free living, privacy protection and light living through a simple staking agreement for the utility token. ‘Oz, TOTOZ. Its goal is to provide asset protection and tax relief to the general digital asset community.
In FAB, OZ’s first partner ecozone, Oz provides a blueprint for ecozones to harness blockchain technology and its limitless potential to fuel economic growth. Oz’s primary goal is to use the business-friendly environment of ecozones to unlock new business opportunities, provide capital and credit, and grow communities centered around ecozones and powered by its utility token.
The blockchain factor
Blockchain has unequivocally demonstrated that it is a force to be reckoned with and can revolutionize multiple industries. In order to accelerate the revolution, the blockchain community must advocate for smart and sensible regulation, understanding that regulation is essential for integration.
A foothold in ecozones is just one solution that could help overcome these barriers. However, the benefits it can bring are many. With around 5,400 ecozones around the world, any country that controls any type of special economic zone or free trade zone would be wise to explore the idea of making room for the blockchain industry. Laws and policies that provide a regulatory playbook for digital assets and blockchain activities would be a great first step.
About the Author:
Jin Gonzalez has created six startups over the years, including two successful exits. Prior to founding Oz, a digital asset project with the goal of connecting a network of special economic zones around the world, he pioneered the adoption and adoption of blockchain technology at Union Bank. of the Philippines, as Director of BD, Fintech and Blockchain. Gonzalez is also the executive director of the Distributed Ledger Association of the Philippines.
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