In response to global pressure to create more comprehensive regulations on cryptocurrency, the nation of Japan has proposed a new set of guidelines to legalize ICOs.
The guidelines, which were drafted by a government-supported research group, will legally standardize Know-Your-Customer and Anti-Money Laundering (KYC and AML) requirements. They also include measures to protect existing shareholders and debt holders, to prevent insider trading, and to increase standard cybersecurity practices.
According to a Bloomberg report, ICO issuers will also be required to show investors exactly how the funds they contribute will be used.
The draft states that the requirements it has laid out at present are “minimal.”
“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,” it reads.
A Changing Regulatory Landscape
Japan’s decision to ramp up regulations on ICOs come at a time of increasing global regulation on cryptocurrency-related businesses and activities.
However, Japan’s regulations are quite a bit more ICO-friendly than those of China and South Korea, who both banned ICOs outright near the end of 2017.
Mizuho Research Institute researcher Kenji Harashima said that “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.”
Crypto regulations have also been developing in the western hemisphere. In the US, the SEC and various other government bodies have been taking their turns at the legal classification of ICO tokens over the past several months, sometimes ending in contradictory statements.
The regulatory climate in Japan has also been heating up ever since more than $530 million worth of NEM tokens were stolen from the Japan-based Coincheck exchange in January of this year. In the wake of the hack, the Japanese government has been increasingly adamant and vigilant of its enforcement of the exchange guidelines laid out in the Virtual Currency Act, which was passed in April of 2017.
Some voices in the cryptocurrency community have been squarely against placing any regulations on cryptocurrency, saying that regulatory measures go against the very nature of crypto.
However, others have embraced regulatory measures as a way to stabilize and legitimize the market in a longer-term sense.