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Japan FSA proposes regulating ICOs as offering of "securities"

Amendment to FIEA proposed

12 April 2019

Initial Coin Offerings face new regulation

The Japan FSA has proposed that cryptocurrencies be categorised as "money" in its bill for the amendment of the Financial Instruments and Exchange Act (FIEA) submitted to the Diet on 15 March 2019. The amendment has been proposed by simply adding a new Article 2-2 to the FIEA, but it will cause substantial changes to ICOs.

By the amendment, ICOs with a purpose of investment business will be regulated as offering of "securities" categorised within collective investment schemes under the FIEA, while currently only the transfer of cryptocurrencies is regulated by the Payment Services Act.

The implementing ordinances thereunder have not been released yet, so the details are still unclear but such ICOs will

  • need to be handled by securities companies licensed under the FIEA and (
  • trigger a securities registration unless the ICO complies with the conditions for relying on a private placement exemption. 

Additionally fund rasing by way of a ICO for the purpose of investment business may need a licence as an investment manager under the FIEA unless exemptions such as Article 63 registration can be relied upon.

We will publish a more detailed article should the bill pass the Diet.