Japan explores ways to formally regulate cryptocurrency ICOs

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As U.S. government watchdogs increase scrutiny of initial coin offerings, or ICOs, Japan is exploring ways to formally regulate the process where companies issue tokens in exchange for cryptocurrencies.

In a proposal by Tama University and the Center for Rule-making Strategies, the members set out guidelines that create rules needed to “establish ICOs as a sustainable financing method.”

Read:What is an ICO?

The research group, which included Japanese lawmaker Takuya Hirai, presented two principles aimed at addressing misunderstandings around ICO issuance.

The first principle would require token issuers to disclose conditions around and any changes to the distribution of funds, profits and residual assets to investors. Second, issuers should provide a means for potential investors to follow the progress that is set out in the businesses white paper, which is meant to serve as a detailed business plan for the company conducting the coin offering.

However, critics of ICOs say white papers today are too broad and lack any concrete data or targets. Furthermore, the paper argues that white papers should be updated as the firm progresses.

“The above is based on the idea that issuers need to explicitly define in advance a means to allow token investors to confirm the progress of the plans stated in the white paper,” the report said.

“In addition, white papers need to be manage in a highly transparent manner: for example, procedures for revising white papers are defined, a revision history is available for viewing, and so on,” the paper said.

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