Japan Unveils Plans to Regulate Initial Coin Offerings
Japan’s Financial Services Agency has held several meetings to discuss how to best regulate initial coin offerings. In addition to registration requirements, the regulator reportedly plans to amend two existing laws that can be applied to token sales.
Registrations and Law Changes
The Financial Services Agency (FSA), Japan’s top financial regulator, “is set to launch regulations on initial coin offerings [ICOs],” Jiji Press wrote on Saturday. Sources told the news outlet:
The FSA will require business operators that issue their own
cryptocurrencies to be registered with the agency.
Japan’s amended Payment Services Act requires cryptocurrency operators to register with the FSA. However, ICOs are currently not covered within the scope of this act.
Jiji Press also reported that, in order to “introduce the [ICO] regulations,” the agency “plans to submit bills to revise the financial instruments and exchange law and the payment services law to next year’s ordinary parliamentary session starting in January.”
FSA’s ICO Discussions
The FSA has been holding study group meetings to discuss how to best regulate token sales. The agency has stated that ICOs are not prohibited but acknowledged that many of them are fraudulent. In March, Satis Group published a report which claims that 78 percent of ICOs are scams.
Sources told Jiji Press:
In view of a number of possibly fraudulent ICO cases abroad, the financial regulator plans to limit individuals’ investment in ICOs for better protecting them.
While Japan currently does not have a specific law for ICOs, two existing laws may apply to them based on how they are structured, the FSA previously explained. The first applicable law is the Payment Services Act. The other is the Financial Instruments and Exchange Act which provides a regulatory framework for securities and securities companies in Japan.
At the latest meeting on ICO regulation held on Nov. 28, the FSA discussed additional areas it plans to regulate.
Some ICOs will be regulated under the Financial Instruments and Exchange Act.
“If an ICO has the characteristics of an investment, and the purchase of a token by a virtual currency is practically deemed equivalent to that of legal tender, the ICO becomes subject to regulations under the Financial Instruments and Exchange Act,” the regulator previously explained.
The regulation will also include disclosure requirements and measures for unfair trades. In addition, distribution channels will be regulated and token issuers will be screened to ensure adequate financial health.