JVCEA proposes issues and improvement measures for crypto asset IEO and leveraged trading at LDP Web3PT

Crypto Asset Review Process

The Liberal Democratic Party’s Web3 project team held its first meeting of the year on June 6th. At this conference, Mr. Genki Oda, Vice Chairman of the Japan Crypto Asset Exchange Association (JVCEA), reported on “regulatory compliance of crypto asset exchange service providers”.

In it, he explained the problems facing the expansion of the domestic IEO market and the improvement measures. He also made recommendations for leverage reform.

In October 2021, JVCEA launched the “Crypto Asset Review Task Force” and has been working on improving the review system and improving work efficiency. As a result, the workload of member companies, JVCEA, and the Financial Services Agency has been greatly reduced.

connection:JVCEA Introduces “Green List System” to Significantly Improve the Efficiency of Domestic Virtual Currency Listing Examinations

As a result, the crypto-asset review process has become much more efficient, with only two pending reviews as of the end of April. In March 2022, the number of crypto assets handled in Japan was less than 50 types, but as of May 2023, it has expanded to 91 types.

Source: JVCEA

For ICOs and IEOs, the main points of examination have been clarified, more appropriate examinations have been conducted, and accuracy and speed have been improved. As a result, four IEOs have been realized in Japan since 2021.

In addition, the Web3 white paper released by the Liberal Democratic Party clearly states the promotion of IEO. These developments are a tailwind for the IEO market as a whole.

On the other hand, challenges are also emerging. Some IEO cases in Japan have problems such as price declines and insufficient trading volumes, and there are concerns that they may adversely affect the review of crypto-assets as a whole.

connection:5 points to note about token sales, learned from successful cryptocurrency IEOs

According to the Nihon Keizai Shimbun, the Japan Crypto Asset Exchange Association (JVCEA) decided on the 6th to appoint Genki Oda as its new chairman.

Consideration for IEO improvement

According to the “IEO Issues and Improvement Measures” excerpted from the study materials by member volunteers, as a countermeasure to the problem of price drops immediately after the IEO, the IEO underwriting company and related parties are prohibited from selling for a certain period (lockup) It is proposed to set up a , to sell in a way that does not affect the market price, and to explain the setting information of the initial price to investors in an easy-to-understand manner.

In addition, in response to the problem of low liquidity of IEO issues, issuers are encouraged to list on exchanges in Japan and overseas, and if they meet certain requirements, they are allowed to use market makers to improve liquidity. Improvement measures aimed at improving

Furthermore, monitoring of issuers is also being considered. When the issuer changes the content of the white paper or the management system, it is possible for the issuer to appropriately judge the business management system of the issuer as an IEO underwriting company, such as re-examining and considering based on the latest situation. important.

As a specific improvement proposal, when the IEO underwriter raises funds, instead of handing the entire amount to the issuer at once, the initiative will provide funds in stages according to the progress described in the white paper. being considered. Furthermore, in addition to the initial fee, a mechanism to charge a maintenance fee over several years is also being considered.

Implementation of these improvement proposals requires cooperation not only with JVCEA but also with the IEO Committee of the Japan Virtual Currency Industry Association (JCBA). In the future, JVCEA has indicated a policy of disclosing and announcing after obtaining the consensus of the parties concerned, based on the voluntary IEO guidelines of issuers and cryptocurrency exchange service providers themselves.

Leverage revision

Regulations on leveraged trading have been tightened as a measure against risk in cryptocurrency trading in Japan. Originally, leveraged trading against crypto assets was possible up to 25 times, just like FX.

However, the amended Payment Services Act and the amended Financial Instruments and Exchange Act, which came into force in 2020, significantly lowered the upper limit, limiting it to a maximum of two times. This change triggered a sharp drop in cryptocurrency trading volumes.

This time, JVCEA is proposing to review the leverage limit of crypto assets again. The basis of the argument is that the provision of leveraged trading requires a Type 1 Financial Instruments Business license, and a loss-cutting system to minimize customer losses is in place along with a business management system equivalent to that of a securities company. pointed out that there is

Although it does not mention a specific ratio, it claims that the revision of leverage will lead to the development of the Web3 market by increasing tax revenues due to an increase in transaction volume, domestic consequences for users, and the entry of institutional investors and new investors.

In order to revise the leverage, the company plans to plan appropriate measures in cooperation with JCBA’s financial committee, the Liberal Democratic Party’s Web3 project team, and the Financial Services Agency.

connection:What is “leveraged trading” practiced by virtual currency investors | Commentary for beginners

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