The Financial Institution Commission (FIC) has stepped in to clamp down against cryptocurrency start-ups using Palau’s name to gain investors by imposing a moratorium against any new applicant who wishes to engage in financial activities involving virtual assets and currency.
In a resolution adopted on March 19, the governing board of FIC said that due to a lack of legal framework in Palau regarding cryptocurrency, the moratorium will stay in place, “until such time that we have a suitable legal framework in place.”
The resolution added that the ban will be imposed until FIC “has determined that is able to monitor, supervise, and regulate all financial institutions wishing to engage in transactions involving or utilizing crypto-assets and/or cryptocurrency under this legal framework.”
The FIC said there are heightened risks associated with new technologies including virtual assets and virtual currency service providers.
The resolution stemmed from the claim of online cryptocurrency firm that its venture is backed by the Palau government.
The company called the Palau Coin described itself as a “blockchain technology-based decentralized digital currency of the Palau Tourism Environmental Protection Fund led by the government of the Republic of Palau.”
The website also appears to favor Palau’s relationship to China, adding that the company “become the biggest beneficiary of the establishment of diplomatic relations between China and Palau.”
However, Palau President Tommy Rememgesau Jr. told reporters that there is no truth to the report and warned the public against cryptocurrency ventures that use false data attributed to the government.
Foreign Investment Board (FIB) has not received any application from PalauCoin. It, however, received a foreign investment application from a company called Silver Lake.
A check with the FIB showed that the firm is composed of Chinese investors aiming to put up a cryptocurrency exchange or a digital currency exchange.
According to the application, one of the incorporators of the company named Zheng Shen is involved with Vbill Inc.
An internet search showed that Vbill Inc. is a leading third-party payment service provider in China.
The company stated that it will put in at least $1 million investment into the country and will employ local workers.
The FIB has yet to decide whether the company’s application will be approved in light of the FIC’s resolution. (Bernadette H. Carreon)