Japan is moving toward legalizing initial coin offerings, even as countries such as China and the U.S. restrict the fundraising method because of the risks it presents for investors.
A government-backed study group laid out basic guidelines for further adoption of ICOs, including rules for identifying investors, preventing money laundering, tracking progress of projects and protecting existing equity and debt holders, according to a report published on Thursday. The proposals will be deliberated by Japan’s Financial Services Agency later this month, and could later become law.
The ICO-friendly guidelines are in contrast to positions taken by China and South Korea, which last year banned the practice citing fraudulent fundraising and excess speculation. The report also avoids clearly identifying ICOs as financial securities, a point which the Securities and Exchange Commission in U.S. has argued makes some ICOs subject to strict securities laws.
The study group’s general adviser is Takuya Hirai, a member of the ruling Liberal Democratic Party and an architect of last year’s law that legalized cryptocurrency exchanges. The group also includes Yuzo Kano, head of the nation’s largest bitcoin exchange bitFlyer Inc., as well as members from the nation’s largest banks; Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. The group is led by Toshifumi Kokubun, a professor at Tama University in Tokyo.
The report says ICO issuers should clearly lay out how raised funds, profits and assets will be distributed among owners of tokens, equity and debt. It also calls for project plans to be tracked and changes documented. Cryptocurrency exchanges should define and adopt industrywide standards for listing ICOs and insider trading should be prohibited, the group said.
