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In a global first move, six Japanese securities firms join hands to create a self-regulating “Japan Security Token Association” which will bring Securities Token Offerings (STOs) to the centerstage.
In what seems like a first for the global cryptocurrency world, six Japanese cryptocurrency heavyweights have come together to create what is now known as the “Japanese Security Token Association”. The founding members include Monex Inc, Rakuten Securities, Nomura Securities, SBI Securities, Daiwa Securities, and Kabu.com Securities.
Headquartered in Tokyo, the new self-regulating organization will work towards seeing that corporate bodies raising finance using the STO model will adhere to Japanese laws and also ensure the safety of investors funds.
Monex Inc revealed this in a statement yesterday 1st October 2019. In the statement, Monex stated:
“…the Japan STO Association primarily works to develop selfregulations regarding security token offerings (“STO”), a form of digital financing methodology, with an aim of the healthy development of STO fund-raising model.”
This has created a paradigm in which cryptocurrency-friendly Japan will be able to define the standards and requirements which will be used for financing as regards the not-so-popular Securities Token Offering (STO).
Monex further indicated in its statement that the new association is “… planning to obtain certification as an Authorized Financial Instruments Firms Association based on the Financial Instruments and Exchange Act and to fully leverage its capabilities as a self-regulatory organization.”
As an authorized association, the new organization will be able to define to a large extent how STOs function and how best they can be used to raise finance. They would also be able to curb incidences of fraud and other tendencies by unscrupulous individuals and organizations.
This move towards self-regulation of the Japanese crypto space isn’t the first attempt at self-regulation. Last year, the fully regulated Japanese cryptocurrency exchanges created the Japan Virtual Cryptocurrency Exchange Association (JVCEA). This move also self regulates the cryptocurrency trading markets and ensures that the cryptocurrency markets remain relatively stable.
While these innovations may not be backed yet by law, they indicate a full understanding that cryptocurrencies have the potential to become a staple offering in many financial markets. This comes at a time where many governments are either skeptic or scared of the cryptocurrencies.
The Beginning of the End for the Initial Coin Offering (ICO)?
ICOs heralded the new era of cryptocurrency financing models which have created many of the heavyweights in the crypto space. However, during the 2017 bubble, many ICOs went awry leaving many to believe that the crypto space was just another “pump and dump scheme” while others inclined that cryptocurrency finance activities were nothing more than elaborate Ponzi schemes.
As such, the ICO has received serious scrutiny due to the grey areas as regards the definition of cryptocurrency tokens. Many ICOs haven’t been clear on the definition of their tokens. Many only used their tokens to raise funds and as such met the requirements of the definition of what securities are according to the Howey test.
STOs, on the other hand, are strictly identified as securities. As such, they are subject to the same scrutiny and due diligence processes and procedures that other securities face.