While ICOs democratize early-stage investing and can help startups gro, in light of the high number of fraudulent ICO cases abroad, Japan’s financial watchdog will limit the amount an individual can invest in an ICO to protect retail investors.
According to the New York-based Statis Group, studies indicated that in 2017, almost 80 percent of ICOs were scams designed to trick retail investors. For example, Arisebank recently tricked investors and promoted themselves as the first decentralized banking platform. Jared Rice, the CEO of Arisebank, was recently arrested as he allegedly defrauded investors of over $4 million in the scam.
To ensure even greater investor protection, any businesses that want to raise funds via a token sale also need to register with the FSA first. For the regulations to pass, the FSA will submit these bills to revise the financial instruments, payment service laws, and exchanges in the next parliamentary session in early next year, January 2019.
Singapore is, however, even more ahead of Japan when it comes to offering a stable regulatory framework. On November 14, 2017, the Monetary Authority of Singapore (MAS) published a guide concerning Digital Token Offerings. The MAS has recently updated the guide to include information concerning businesses looking to raise additional capital via an ICO on November 30, 2018.
The updated draft goes into greater detail about the Singaporean Central Bank’s position on how financial intermediaries should behave based on Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) policies.
The New Payments Framework emphasized the importance of intermediaries taking appropriate steps to develop and implement internal policies under the appropriate MAS notices. Even if the cryptocurrency token is not a security, it will, however, need to comply with AML and CFT regulations.