Throughout 2017, the most favored way for funding Blockchain startups was through ICOs, with over 8 billion being raised to fund a variety of blockchain-related projects since January 2017. However there has been little accountability in the ICO and cryptocurrency space; a situation that has led a great many projects to fail). But even an unregulated market has not deterred investors from taking a punt on this budding industry, and now the Japanese government has moved to make ICOs legal.
According to study backed by the Japanese government, there might soon be further adoption of ICO thanks to a layout of rules and guidelines that will help identify ICO investors, protect them from fraudulent ICOs and ultimately prevent money laundering by tracking ICO projects . The report on the study (which could eventually become law) was published as a proposal, set to be discussed later in the month by the Financial Services Agency (FSA) of Japan.
Japan’s Move in Contrast to Other Markets
In comparison with China and the US, Japans recent move towards legalizing ICOs is in contrast with its main rivals, including South Korea. In fact, last year saw South Korea ban ICOs, claiming that they were fraught with speculation and excess fraudulent fundraising. China also maintains a harsh stance on ICOs
However, even with a seemingly positive outlook on ICOs, the report by the government-backed study did not directly mention Initial Coin Offerings as financial securities. In this regard, the US government has previously identified the issue of ICOs as financial securities as a key contributing factor that makes most them fall under strict regulatory laws.
What Researchers of the Study Say
A researcher from Mizulo Research institute was quoted on Bloomberg.com saying:
ICOs are groundbreaking technology, so if we can implement good principles and rules, they have the potential to become a new way to raise funding
Mizulo was part of the group that came up with the government-backed report. The rest of the study group team also included Takuya Hitai, who came up with the last year’s laws to legalize cryptocurrency exchanges and is also part of the ruling liberal democratic party. Yuzo Kano was also part of the study group. He is the head of Japan’s largest Bitcoin exchange (bitFlyer.inc).
Guidelines From the Report
If the report is to be passed as law, ICO issuers in the country will have to clearly lay out how funds were raised, how the assets and profits are to be distributed among investors and the owners of the project; plus, how the ICO-issuing entity will distribute equity and debt. The guidelines also require the tracking of ICO projects, with cryptocurrency exchanges being required to come up with industry-wide standards for listing ICOs and prohibit insider trading.
According to the report,
“The ICO Business Research Group proposes the above principles as the minimum principles that should be satisfied at this time” and the move is set to “enable ICOs to be used safely by a wide range of issuers and investors and to be accepted well in the society, more detailed rules may be required”.
Image Credit: Deposit Photos
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