[BLOCKFESTA 2018] Kawai Ken _ Legal advisor to the Japan Cryptocurrency Business Associatoin

[Summary]

After Coincheck hacking incident in January 2018, the JFSA has significantly enhanced supervision of cryptocurrency exchanges. It conducted on-site inspections on 7 licensed exchanges and 16 exchanges that were allowed to operate without the license during the grace period. All of these 7 licensed exchanges were given business improvement order and 13 exchanges out of 16 non-licensed exchanges had to withdraw from the market.
To tackle with various issues related to cryptocurrency business, the JFSA established the “Study group of regulating Virtual Currency Exchange Services” to study appropriate legal system in March. The main issues include how to regulate cryptocurrency margin trading and ICO. It is expected that the study group will announce its recommendation of revised or new legal framework in Autumn or Winter this year.
As for the ICO, as most of the blockchain tokens are considered as Virtual Currency under the Payment Services Act, in order to conduct ICO, the token issuer should obtain the license, which is very tough. And, thus, currently it is very difficult to sell tokens to residents in Japan.
There is a silver lining in the cloud. Very recently, the JFSA resumed review of the filing from the applicants for the cryptocurrency exchange license, which had been stopped after the Coincheck hacking incident.

Meanwhile, with regard to the blockchain business unrelated to cryptocurrency, there was a good legal development. Japanese Regulatory Sandbox has launched in June. Although this new scheme is open to ideas for the “testing project” involving any industrial sector, the government announced that blockchain projects, together with those of AI, IoT and big data, are most suitable for this sandbox system. The scheme is open to any company in any country.

[BLOCKFESTA 2018] Kawai Ken _ Legal advisor to the Japan Cryptocurrency Business Associatoin

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Kane Dane