Cryptocurrency proponents have been understandably excited about the prospect that the Japanese government might regulate and legalize initial coin offerings (ICOs). To them, it is yet another sign that the young technology is beginning to come into its own and to negotiate a balanced relationship with the status quo.
A working group backed by the Japanese government has proposed new guidelines intended to legalize and regulate ICOs. In a report published April 5, Japan’s ICO Business Research Group — a task force that includes lawmakers, academics, and bankers — called for the government to legalize ICOs and adopt clear industry rules and practices that encourage growth but also protect investors.
Under the proposed guidelines, ICO operators would be required to perform KYC verification on all investors to prevent money laundering. They would also be required to make copious disclosures to investors and authorities prior to beginning the offerings and regularly update them on how closely the project is sticking to the roadmap laid out in its whitepaper. Additionally, these guidelines would include provisions protecting existing shareholders and debt holders, restricting unfair trade practices like insider trading.
According to Bloomberg, the Financial Services Agency (FSA) will consider the proposal as soon as this month, though it may take several years for them to be codified into law. Once adopted, these rules would likely further cement Japan’s status as one of the world’s leading cryptocurrency and blockchain development hubs, particularly since regional competitors China and South Korea and Japan have — at least to date — taken a hard line against ICOs.
Japan is steaming ahead in terms of cryptocurrency adoption despite some questionable, cryptocurrency-related events that have transpired on its soil. Back in January of 2018, hackers stole several hundred million dollars’ worth of lesser-known cryptocurrencies from Coincheck — a major Japanese exchange.
The Coincheck hack follows news in December that a South Korean cryptocurrency exchange called Youbit lost 17 percent of its digital assets. Its parent Yapian filed for bankruptcy.
In another high-profile case, Tokyo-based Mt. Gox filed for bankruptcy in 2014 and said it lost 750,000 of its users’ bitcoins and 100,000 of the exchange’s own. The company was the largest bitcoin exchange at the time.