On March 8, the Japan Cryptocurrency Business Association (JCBA), a membership organization with the aim of achieving the sound development of the cryptocurrency business, released “Recommendations on New ICO Regulations,” which contain recommendations for Initial Coin Offerings (ICOs: financing using cryptocurrency technology).
The JCBA launched the ICO working group at the end of last year with the goal of developing appropriate ICO laws and regulations from the perspective of an organization representing cryptocurrency business operators. Since its inception, the working group has held a total of three discussions. This time, the JCBA released recommendations on appropriate ICO regulations based on discussions within the working group, with due consideration given to responding to ICOs, as stated in the “Report from the Study Group on the Virtual Currency Exchange Services” by the FSA.
The JCBA stated, regarding the resumed handling of new cryptocurrencies by cryptocurrency exchanges, that the recommendations have not been changed for about a year, and it expects to see opportunities to clarify issues soon, in order to resume the handling of Altcoin and ICO tokens in Japan, which are already handled overseas.
Regarding stablecoins (price-stable cryptocurrencies), while their regulatory framework remains unclear in Japan, given that they are issued based on similar technological platforms to those of cryptocurrencies and they are primarily traded on cryptocurrency exchanges overseas, transaction risk and user protection should be the same as cryptocurrencies. Therefore, the JCBA believes that it is appropriate to legally classify stablecoins as cryptocurrencies.
The JCBA stated that there is a need to clarify whether security tokens, which are subject to the Financial Instruments and Exchange Act, fall under “Article 2 (1) Securities” or “Article 2 (2) Securities,” and pointed out the need for a rule to exclude security tokens from the Payment Services Act, in order to avoid duplicating regulatory requirements imposed by the Financial Instruments and Exchange Act and the Payment Services Act.
Regarding ICO tokens, the JCBA stated: “Given that ICO tokens may promote Japan’s industrial development in the future as a new financing method, it is not desirable to impose extremely strict regulations on those with a low risk from the perspective of user protection, which would make it virtually impossible to conduct ICOs”. The JCBA also pointed out that considering regulations take into account investment elements that are necessary even for non-investment ICOs, imposing stricter regulations on ICOs compared to Security Token Offerings (STOs) lacks balance.
The JCBA also mentioned that because information on issuers and ICO tokens is held primarily by issuers rather than cryptocurrency exchanges, it is not appropriate to impose excessively strict duties (a duty to investigate and a duty to provide detailed information) on cryptocurrency exchanges. The JCBA expressed its view that exchanges will be required to charge large fees to issuers in order to assume such duties and responsibilities.
*This article was written by Fisco