As the ICO market is growing in Japan, the country’s Financial Services Agency (FSA) has published a statement clarifying its position on ICOs. In addition to risk warnings, the agency detailed how two existing laws may apply to token sales, Bitcoin News reported.
The first risk concerns price volatility, it said, clarifying that “the price of a token may decline or become worthless suddenly.”
Regarding the second risk – potential for fraud - the FSA said: “You should have a deal [invest] at your own risk only after understanding enough the risks above and the content of an ICO project if you buy a token. You should also pay careful attention to suspicious solicitation of ICOs.”
As for regulation of ICOs, the FSA emphasized that for businesses “ICOs may fall within the scope of the Payment Services Act and/or the Financial Instruments and Exchange Act depending on how they are structured.”
“If a token issued in an ICO falls under the virtual currency provisions of the Payment Services Act, then businesses providing digital currency exchange services regularly “must be registered with each Local Finance Bureau that is the delegated authority to the Prime Minister,” the FSA wrote.
However, “if an ICO has the characteristics of an investment, and the purchase of a token by a virtual currency is practically deemed equivalent to that of legal tender, the ICO becomes subject to regulations under the Financial Instruments and Exchange Act,” the agency stated.