Japan Unveils Guidelines to Legalize Initial Coin Offerings (ICOs)

While countries like the United States and China aim to restrict Initial Coin Offerings (ICOs), Japan is firmly on the path towards legalizing the popular (and, at times, controversial) fundraising method.

Japan Preps ICO Guidelines

Japan is leading the charge in the effort to effectively regulate Initial Coin Offerings while ensuring positive growth and investor protection in the cryptocurrency space.

According to a report written by the government-backed ICO Business Research Group and published by Tama University and The Center for Rule-making Strategies, “the legal position of ICO is unclear and tax/accounting issues related to ICO remain in a large scale. In some cases, measures for investor protection are not sufficient. Such issues are considered problematic throughout the world.”

The report continues:

ICO is still in its infancy and has no industry practices yet. Appropriate rules must be set to enable ICO to obtain public trust and to expand as a sound and reliable financing method.

As such, the authors have proposed regulatory guidelines to facilitate safe practices in the country’s ICO space.

The Specifics

First and foremost, the Group proposes “two principles on the issuance of tokens” which focus on investor protection:

1. Issuers should define and disclose conditions for the provision of conveniences such as services and rules on the distribution of procured funds, profits, as well as residual assets, to investors of tokens, shareholders, and debt holders.
2. Issuers should define and disclose a means for tracking the progress of white papers.

The Group has also laid out guidelines for practical operations:

1. ICOs should be designed to be acceptable to existing shareholders and debt holders.
2. ICOs should not become a loophole in existing financing methods as equity finance.

Furthermore, the Group proposes five principles to ensure investors are protected when buying and selling tokens:

1. Token sellers should confirm the identity (Know Your Customer: KYC) and suitability of customers.
2. Administrative companies that support the issuance of tokens should confirm the KYCs of issuers.
3. Cryptocurrency exchanges should define and adopt an industry-wide minimum standard on token listing.
4. After tokens are listed, unfair trade practices of such tokens such as insider trading should be restricted.
5. Parties related to the trading of tokens such as issuers, administrative companies, and token exchanges should make efforts to ensure cyber security.

The proposals and guidelines laid out by the Group’s report should help Japan’s continued push to lead the world in effective cryptocurrency regulation.

The report also notably follows a similar set of guidelines for issuing digital tokens proposed by Russia’s Ministry of Telecom and Mass Communications (MinComSvyaz) — which positions Russia’s national currency, the Ruble, as an integral part in the ICO process.

What do you think of the proposals laid out by Japan’s ICO Business Research Group? Do you think other countries should consider the same guidelines? Let us know in the comments below!

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