While cryptocurrencies and initial coin offerings are banned entities in China, with countries like the U.S. and some others imposing strict regulations on the nascent digital currency ecosystem, Japan – a crypto friendly nation – is planning to legalize and regulate initial coin offerings.
The Need for Regulation
On April 5, 2018, Japan’s Business Research Group drafted a proposal requesting that the government regulate ICOs in a non-draconian way that would protect investors’ interests and encourage the growth of the nascent ICO industry.
As reported by Bloomberg, Japan’s Financial Services Agency (FSA) will take a critical look at the proposal a few weeks from now. If everything works according to plan and the bill gets accepted, it could become law in a few years time – a development that will undoubtedly restore Japan’s lead in the ‘cryptosphere’ and exchanges that have left the nation due to recent regulatory bottlenecks may likely come back.
“ICOs are groundbreaking technology, so if we can implement good principles and rules, they have the potential to become a new way to raise funding,” said Kenji Harashima, a researcher at Mizuho Research Institute.
The study group is made up of highly reputable members of the Japanese society, including Yuzo Kano, the CEO of Japan’s largest crypto trading platform by trading volume, bitFlyer. Takuya Hirai, a member of Japan’s ruling political party, is the group’s general adviser, Toshifumi Kokubun, a professor at Tama University, is the chairman of the task force. Also, other top officials of Japan’s largest financial institutions – Mitsubishi UFJ Financial Group Inc, and Sumitomo Mitsui Financial Group Inc are members of the working group.
Bringing the Wider Investment Community to ICOs
The proposal is formulated in a way that would be beneficial to organizers and investors of ICOS. It states that organizers must explicitly say how funds generated from the project, as well as profits and assets, would be distributed to token holders, equity and debt. The paper also requires exchanges to desist from insider trading, as well as map out a general standard for listing tokens.
“The ICO Business Research Group proposes the above principles as the minimum principles that should be satisfied at this time, to enable ICOs to be used safely by a wide range of issuers and investors and to be accepted well in the society, more detailed rules may be required,” an excerpt of the report declared.
Since cryptocurrencies like bitcoin and the altcoins became highly valuable digital assets, startups in the blockchain space have found ICOs an excellent means of raising funds to bring their projects to life.
However, due to the widely unregulated nature of ICOs and the entire digital currency industry, bad actors have proliferated into the ecosystem. This kind of ‘soft’ regulation is what the entire crypto space needs, for now, to deter fraudsters from taking advantage of unsuspecting investors and boost the continuous growth of the world of blockchain finance.