Japanese Research Group Suggests Guidelines for the Legalization of ICOs

ICOs, Law and Regulation, News

Japan could be moving towards the legalization of ICOs after a government-backed study group published a list of guidelines in the hope that they will help with further adoption by protecting investors and establishing minimum standards for the industry.

The document provides a list of rules that could be imposed to make the crypto space safer for investors by creating minimum standards for issuers and administrators in the industry. The aim is to provide clarity between parties and investors so that problems arising from the uncertain legal position of ICOs can be addressed.

“Appropriate rules must be set to enable ICO to obtain public trust and to expand as a sound and reliable financing method.” – ICO Business Research Group, Tama University.

Members of the research group

The group is chaired by a professor of Tama University, Toshifumi Kokubun. Kokubun is the Managing Director of the Center for Rule-making Strategies that published the paper along with a reputable list of legal, technical, and tax advisors as well as member companies.

Amongst these advisers is Takuya Hirai, a member of the house of representatives and the man behind last year’s law that legalized cryptocurrency exchanges.

Proposed guidelines

The guidelines, which according to Bloomberg could become law, include rules that would require more transparency regarding how an ICO operates as well as including anti-money laundering (AML ) and know your customer (KYC) compliance.

The guidelines also suggest a list of trading principles designed to protect investors. These include the restriction of unfair practices (such as insider trading) and that all parties involved in the trading of tokens must make efforts to ensure cybersecurity. The guidelines are unsurprising given the FSA’s crackdown on crypto exchanges in the wake of the Coincheck hack.


The paper also states that token issuers should define and disclose (before issuance) a means for investors to track the progress of plans stated in the whitepaper. This appears to be a measure designed to deter scammers by compelling issuers to provide updates to their investors.

Token Classification

These guidelines define ICOs as securities which is in line with comments made by SEC Chairman, Jay Clayton, but in contrast, the research paper admits that ICOs are difficult to classify since there may be types of token that are forthcoming but presently unknown.

For now, the research group has identified three types of token:

Venture company — fund-raising by venture companies through high-risk, high-return investments.
Ecosystem — collaborative efforts involving multiple corporations or local governments.
Large Company — high-risk in-house projects.

An optimistic take on crypto-regulation

Throughout the paper, the intention of these guidelines is made clear. This is an attempt to galvanize the crypto world by establishing trust in ICOs. It cites the worldwide lack of sufficient investor protection and aims to resolve those problems in the hope that doing so will encourage more public trust and demonstrates the region’s continuing positivity regarding the token economy.

Michael is an English and Creative writing graduate of Liverpool John Moore’s University, a former editor of several magazines, and a crypto-currency enthusiast. He is mostly interested in crypto-legislation and the potential of decentralized technology to change the world.

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