Japan is making progress towards the full regulation and legalization of ICOs, with a government-backed study from Tama University detailing how to approach the new fundraising technology.
The study from the Centre for Rule-Making Strategies at the university identifies that the ICO market is still well within its infancy, but acknowledges that the fundraising method’s ability to generate investment capital has garnered international attention and could be utilized effectively should the proper legal or regulatory frameworks be in place.
How to regulate an ICO
The research group that conducted the study was comprised of experts and advisors who worked across various industries and specialist fields; they sought to identify potential ICO use cases, and then frame a set of rules around them. The study reads:
“For the permeation and development of ICO, it would be desirable to set rules on “issuance of tokens” and “trading of tokens in the issue market.” As for the purchase and sale of tokens in the trading market, there are certain rules set force in the Payment Services Act. However, there are no laws or regulations stipulating explicit rules for issue markets, which leads to cases of misunderstanding between parties and cases of investors being left without protection.”
The report, which could be a catalyst for future laws surrounding ICOs, has a set of ‘issuance principles’ which are designed to keep ICOs transparent and accountable. One of which is that issuers should “define and disclose” how funds, profits and residual assets are to be distributed amongst investors, shareholders and debt holders.
Furthermore, the study goes into some details on how to track the progress of whitepapers, often the go-to document for any potential ICO investor; investors identify the development of all plans within the whitepaper and are able to view the history of updates and revisions within it.
Japan has been a notably volatile country in regards to ICO practices and Bitcoin operators; in late 2017, multiple media outlets reported that Japan was readying to ban ICOs entirely.
However, Japanese lawmakers and regulators have proven themselves time and time again to be extremely forward thinking when it comes to the adoption of cryptocurrencies. In 2015, in the wake of the Mt. Gox scandal, Japanese financial regulators began working out how to regulate domestic cryptocurrency exchanges, and in 2017 those visions were realized when Japan approved the registrations of 11 cryptocurrency exchanges, allowing them to operate legally in the country.
Despite Japan’s efforts to create a regulatory framework for exchanges, ICOs are the favored method of fundraising for blockchain startups and this report could finalize the legitimacy of cryptocurrency and all related technologies in the country, providing blockchain startups with the ability to raise funds through the previously controversial method.
Japan is part of the growing global movement to regulate and integrate cryptocurrency into respective societies; South Korea has been at the centre stage for a myriad of controversies and is now, similarly to Japan, making incredibly positive steps toward a secure crypto future that works for the public and the government.