Is Japanese cryptocurrency law turning its back on innovation?

31 May 2018 2:21pm
Once heralded as having struck an optimal balance between regulation and innovation, Japanese law on cryptocurrencies has created a black hole for initial coin offerings. In post-Coincheck Japan, the only way for most local startups to launch an ICO appears to be by skipping the country.

When Japan became one of the first countries to legally define virtual currencies and put coin exchanges under the supervision of its finance sector regulator last year, it triggered a boom in cryptocurrency trading that led to a bubble (see here). The revised Payment Services Act put on the books virtual currencies of two types: those usable for making payments to any number of unspecified parties, and those that can be exchanged with unspecified parties for the first type.

The law also stipulated that any businesses involved in the exchange of such digital tokens must register with the Financial Services Agency, providing an overview of themselves, the virtual currencies they plan to handle and their intended services. And this is the point at which it has become virtually impossible — at least for the foreseeable future — for Japanese companies to launch domestic ICOs.