Source: iStock/eli_asenova

Japan is moving towards legalizing Initial Coin Offerings (ICOs) by having a government-backed study group lay out basic guidelines for further adoption, according to a report by the Center for Rule-making Strategies at Tama University in Tokyo, published on Thursday.

The report includes rules for identifying investors, preventing money laundering, tracking progress of projects and protecting existing equity and debt holders. The proposals will be deliberated by Japan’s Financial Services Agency later this month, and could eventually become law in a few years, according to Bloomberg. The report states that although “ICO is still in its infancy and has no industry practices yet,” there must be basic rules set in place that would help ICOs “obtain public trust and to expand as a sound and reliable financing method.”

ICO issuers should clearly lay out how raised funds, profits and assets will be distributed, calls for project plans to be tracked and changes documented, as well as the prohibition of insider trading.

The report then goes on to state, “The ICO Business Research Group proposes the above principles as the minimum principles that should be satisfied at this time. To enable ICOs to be used safely by a wide range of issuers and investors and to be accepted well in the society, more detailed rules may be required.”

By doing this, Japan differs from what seems to be a regional practice of banning ICOs outright, which is what China and South Korea did, citing fraudulent fundraising and excess speculation. However, sources within the Korean government have already told the media that regulators, tax agencies and justice officials are considering re-legalizing ICOs should “certain conditions be met,” as reported by Cryptonews.com.

The study group’s general adviser is Takuya Hirai, an architect of last year’s law that legalized cryptocurrency exchanges. The group also includes Yuzo Kano, head of the nation’s largest bitcoin exchange bitFlyer Inc., and members from the nation’s largest banks Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. It was led by Toshifumi Kokubun, a professor at Tama University.