A working group tasked by the Japanese government with investigating ICOs have reported back with their recommendations. Refreshingly, rather than trying to shut anything down, the group hopes that their suggestions will permanently “establish ICOs as a sustainable financing method.”
The group notes that legislation is long overdue as, despite the explosion in interest, “the legal position of ICO is unclear and tax/accounting issues related to ICO remain.” Along with regulators worldwide they also note that “measures for investor protection are simply insufficient.”
Focus on Transparency
With their guidelines the group is hoping to lay out a plan for ICOs to “obtain public trust” and help them become “a sound and reliable financing method.”
Among the recommendations is a call for ICOs to be explicit about, and make formal engagements in relation to, how funds, profits and debt obligations are to be shared between the owners of equity and the owners of tokens.
“Currently, what outlines ICO do make in this regard often tend to be flaky, to say the least,” stated serial ICO investor, Jonas Biddecombe. “If ICOs can be nudged into traditional accounting transparency mechanisms for how they both raise funds and spend them, that would be a step forward. The Japanese appear to be pushing for this kind of approach which will make it a model for the industry.”
There are also outlined 5 “trading principles” to protect investors, including know your customer (KYC) obligations on the part of the seller and cryptocurrency exchanges being accountable to industry standards in listing procedures.
The report’s suggestions, described as “the minimum principles that should be satisfied at this time” will serve as the basis for discussion by the Japanese Financial Services Agency before finally, and much fleshed-out, finding their way into law.
For Kenji Harashima of the Mizuho Research Institute, “ICOs are groundbreaking technology” but need “good principles and rules” to fulfil their potential as a new fund-raising method.