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Japan's Finance Watchdog Eyeing ICO Regulation, Says Report

Japan’s financial regulator is mulling the creation of a regulatory framework for companies raising funds through initial coin offerings, a report indicates.

According to Sankei Shimbun, the Financial Service Agency is considering the revision of relevant laws and regulations in an effort to regulate ICOs in Japan, amid the growing popularity of token sale activities within the territory.

The report indicates that Japan currently has no clear regulations covering ICOs specifically, while the existing bitcoin payment law that went into effect last April is not sufficient to define the legal status of some ICO activities.

“There is an increasing demand for amendment of the law, and the FSA is planning to consider suspension of inappropriate ICOs,” the report reads.

The FSA has already started monitoring ICOs that target Japanese investors and are deemed suspicious by the agency.

As reported, the FSA has issued multiple warnings to a Macau-based cryptocurrency firm that solicits interests from residents in Japan and published a formal statement on its website to order a halt to the firm’s operation in the country.

The move towards a potential regulation is also a follow-up to the FSA’s statement in October last year, in which the agency stressed several risk factors of token sales activities with a fund-raising purpose.

Other nations have recently moved to more clearly define ICO tokens, both to protect investors and to bring clarity to the industry.

Just four days ago, Austria announced plans to draw up ICO and cryptocurrency regulations, using existing rules for the trading of gold and derivatives as a model.

And on Feb. 22, Germany’s financial markets regulator issued new guidance on how it will classify ICO tokens, including those it will consider securities.

Japanese yen image via Shutterstock

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Japanese Financial Regulator to Increase Crypto Exchange Inspections

Japan’s financial watchdog is reportedly planning to conduct more on-site inspections of domestic cryptocurrency exchanges.

According to a report from Japan’s Nikkei, the country’s Financial Services Agency (FSA) is looking to inspect several more cryptocurrency exchanges in the country starting as soon as this week, following its visits to Coincheck in the days after its recent major hack.

The plan comes as the agency seeks to push for stronger security procedures to be adopted by cryptocurrency exchanges in Japan in order to protect investors and to prevent such intrusions from reoccurring.

As reported previously, around $531 million-worth (at the time) of NEM tokens were stolen on Jan. 26 from the Coincheck exchange. That led to the FSA’s on-site inspection on Feb. 2 to gauge the platform’s security and financial ability to compensate victims, as it has promised.

The FSA has stated that it had warned the exchange about its security loopholes before the hack, which also explained why Coincheck has yet to obtain a formal approval from the agency.

In fact, Nikkei’s report further explained that, while the cryptocurrency exchange business is burgeoning in Japan amid wider market growth, many platforms have fallen behind in terms of security protections.

According to the report, among the total 32 cryptocurrency exchanges, Coincheck is currently one of the 16 platforms that are not formally registered with the FSA because the operation started before the cryptocurrency law went into effect last April in Japan.

Japanese law enforcement image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

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Japanese Financial Watchdog Issues Warning over ICO Risks

Japanese financial regulator, the Financial Services Agency (FSA), has issued a statement warning investors of the risks associated with initial coin offerings (ICOs).

In the statement released Oct. 27, the FSA stressed the “high” risk factors of digital tokens issued as a way of raising funds from for investors. The regulator aired several concerns over the blockchain use case including price volatility, with the FSA saying “The price of a token may decline or become worthless suddenly.”

Further, the agency emphasized the potential for fraud in the nascent industry. “There are possibilities that the projects in the paper are not implemented, or the goods and services planned are not offered in reality,” the document states.

The regulator warns:

“You should have a deal at your own risk only after understanding enough the risks … and the content of an ICO project if you buy a token.”

The statement also stresses that projects launching token sales that ICOs are regulated and may fall “within the scope of the Payment Services Act and/or the Financial Instruments and Exchange Act” depending on the structure of the scheme. As a result, ICO holders are bound to comply with certain rules and regulations under those acts.

The news follows other recent ICO warnings from countries including the U.S., Singapore and Canada, among others. In September, South Korea and China went so far as to issue outright bans on ICOs, labelling them, in China’s case, as “illegal and disruptive to economic and financial stability.”

Japan FSA image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.