Japan’s Crypto Association issues ICO regulation recommendations

Japan’s Cryptocurrency Business Association (JCBA), a membership organization that has the ear of Japanese lawmakers, has released its recommendations for new ICO regulations. Meanwhile, e-commerce giant Rakuten continues to build out its crypto offering, and Japanese crypto legislation gets a makeover.


With the aim of achieving the sound development of the cryptocurrency business, JCBA launched its ICO working group at the end of last year with the goal of developing appropriate ICO laws and regulations from the perspective of an organization representing cryptocurrency business operators – an approach favoured by Japanese regulators.

Regarding ICO tokens, the JCBA says “Given that ICO tokens may promote Japan’s industrial development in the future as a new financing method, it is not desirable to impose extremely strict regulations on those with a low risk from the perspective of user protection, which would make it virtually impossible to conduct ICOs”.

The JCBA also pointed out that considering regulations take into account investment elements that are necessary even for non-investment ICOs, imposing stricter regulations on ICOs compared to Security Token Offerings (STOs) lacks balance.

The JCBA says there is a need to clarify whether security tokens, which are subject to the Financial Instruments and Exchange Act, fall under “Article 2 (1) Securities” or “Article 2 (2) Securities,” and suggested the exclusion of security tokens from the Payment Services Act, in order to avoid duplicating regulatory requirements imposed by the Financial Instruments and Exchange Act and the Payment Services Act.

With regards to an onus for due diligence being placed on exchanges, the JCBA said because information on issuers and ICO tokens is held primarily by issuers rather than cryptocurrency exchanges, it is not appropriate to impose excessively strict duties (a duty to investigate and a duty to provide detailed information) on cryptocurrency exchanges. The association made the point that if the onus for such investigation was to fall on the exchanges, then they would be required to charge large fees to issuers in order to fund those responsibilities.

Regarding stablecoins (price-stable cryptocurrencies), while their regulatory framework remains unclear in Japan, given that they are issued based on similar technological platforms to those of cryptocurrencies and they are primarily traded on cryptocurrency exchanges overseas, transaction risk and user protection should be the same as cryptocurrencies. Therefore, the JCBA believes that it is appropriate to legally classify stablecoins as cryptocurrencies.

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