The Japan Virtual Currency Exchange Association (JVCEA), the organization approved by the Financial Services Agency to self-govern cryptocurrency regimes, imposed regulations on September 27 entitled “Guidelines on Regulations Pertaining to the Sale of New Cryptocurrencies.” All cryptocurrency exchanges that have completed registration with Japanese regulating authorities are members of the JVCEA, and these regulations are expected to have an impact on initial coin offering (ICO) and initial exchange offering (IEO) businesses in Japan going forward.

 

Earlier in June, the Financial Services Agency released operational guidelines for cryptocurrency exchange operators with a lengthy postscript on ICO-related businesses.

 

The operational guidelines present information on the necessity to disclose details such as if token sellers are also the token’s issuers, whether “issues such as the eligibility/potential for realization of the business and the suitability of the handled token will be rigorously examined and validated.” They also present information on whether “appropriate regulations are in place related to examining issues for judgement of not only the eligibility/potential for realization of the business and the suitability of the handled token, but also the financial status of the issuer and the propriety of selling other tokens, and whether a scrupulous examination of substance can be carried out” in the event that sales are carried out on behalf of the token issuer.

 

The ICO market declined significantly after 2018 due to the appearance of many fraudulent ICO projects. However, IEOs, which are consigned to cryptocurrency exchanges that have already been approved by regulatory authorities for the sale of new cryptocurrencies, have been gaining attention. With these movements, the guidelines implemented by the JVCEA also specifically disclose information on an examination into exchanges that accept consignment for sales implementing regulations in relation to IEOs as well.

 

Many ICO projects were launched in Japan in 2017 with some projects raising significant amounts of money, but there are still no precedents for IEOs. By disclosing these guidelines, it is possible that there will be new entrants in the same market.

 

*This article was written by FISCO.