It was learned on Feb. 26 that the Financial Services Agency (FSA) is considering regulating initial coin offerings (ICOs) through which companies raise capital with cryptocurrency. ICOs are becoming a popular means to raise capital for venture businesses, but there have been cases overseas of the people raising the capital fleeing with the investors’ money they collected. The FSA plans to consider amendments to the relevant laws with regard to ICO procedures.

Companies offer their own cryptocurrency in the form of “tokens” and sell them to investors to raise capital. These companies designate certain major cryptocurrencies, such as bitcoin, as forms of payment.

Since it is easy to solicit investors through ICO just by uploading a simple project proposal online, this is a convenient way for startups to raise capital. However, cases akin to fraud, in which business projects were never implemented and the people raising the capital disappeared, have been reported in other countries.

Japan has no laws governing ICOs explicitly. The current legal system is seriously inadequate, with the amended Fund Settlement Law and the Financial Instruments and Exchange Law practically providing the only relevant legal guidance. There have been calls for legal amendments, so the FSA is also considering the possibility of banning inappropriate ICOs. (Slightly abridged)