On November 26, the Financial Services Agency (FSA) of Japan held an internal meeting to discuss the possibility of allowing private crypto initial coin offering (ICO) projects.
Nikkei exclusively reported that local financial authorities are actively exploring the legalization of ICOs for institutional investors and accredited investors, as long as they are lawfully conducted within the boundaries of existing financial regulations.
Following the report of Nikkei, on December 2, local media outlet JIJI Press reported that the FSA is close to releasing an official guideline on ICO regulation to speed up the process of creating a vibrant ICO startup ecosystem in the country.
Kakao, the largest internet conglomerate in South Korea, recently established its blockchain arm in Japan to run a private token sale for a project called Clay.
A representative of Kakao stated that the company has nearly secured $300 million in funding, in a private ICO, from its partners:
“Kakao has been securing strategic partners to help improve and grow the global blockchain ecosystem by obtaining new capital. It could be recognized as a private sale, but it’s not open to individual investors and is participated by institutions that are partnering with Kakao. Currently, it is not possible to finalize exact numbers regarding the funding round, and the company is not in the position to openly share which companies are involved in the initiative. Kakao needs to communicate with its partner companies first.”
Given the regulatory green light provided to Kakao by local financial authorities, it is possible that the government has started to enable firms to conduct private token sales unofficially prior to the release of its regulatory framework.
Throughout the past several years, Japan has not opposed the idea of firms running private token sales by securing funds from institutional investors. The country’s main concern around cryptocurrencies has been the existence of privacy-focused assets like Zcash, Monero, and Dash, which the FSA describes as the “three siblings”
Based on the government’s renewed interest towards emerging technologies and fintech that includes cryptocurrencies and blockchain technology, the FSA’s decision to potentially allow ICOs was not a revelation to local analysts and companies.
With Kakao’s private sale successfully conducted and Line, the biggest messaging app in Japan, operating a token called LINK, the government could begin to aggressively encourage large-scale companies to conduct private ICOs to compete against other major markets in Asia and Europe like South Korea, Switzerland, and Singapore.
Already, in October, Min Byung-doo, the chairman of Korea’s National Policy Committee, requested the government to initiate the process of legalizing ICOs by considering the success of ICOs run by Telegram and EOS (Block.one).
At the time, he said that ICO has become a new trend and a widely utilized method of fundraising and that the government cannot restrict it while competing economies continue to adopt it.
Chairman Min said:
“The government cannot dismiss ICO. It needs to allow companies to conduct ICO. ICO has become a new trend in the global market and it is the responsibility and ability of the government to embrace new technologies. We can see that the flow of investment is clearly changing compared to ICO and angel fundraising. The ICO has raised $1.7 billion for Telegram and $4 billion for Block.One, It is getting bigger and bigger.”
South Korea has tended to follow Japan’s lead in cryptocurrency regulation throughout the last 48 months, like most countries in the G20. The latest move by the FSA to legalize private token sales may lead to South Korea engaging in a similar initiative in the short-term.
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Last modified: June 12, 2020 11:12 AM UTC