[NEWS] JCBA submits initial proposal for reform to JVCEA to improve IEO market

On the 26th, the Japan Cryptocurrency Business Association (JCBA) announced that it had submitted an initial proposal for self-regulation reform of the IEO system to the Japan Cryptocurrency Exchange Association (JVCEA).

An IEO (Initial Exchange Offering) is a fundraising method that can be used by a wide variety of businesses, where a cryptocurrency (virtual currency) exchange acts as an intermediary to conduct a token sale.

The system is designed to improve reliability, as cryptocurrency exchanges under the supervision of the Financial Services Agency review and continuously monitor the feasibility of projects.

In addition, the tax reform for fiscal year 2023 established exemptions from the application of end-of-period mark-to-market valuation tax on corporate tax on self-issued tokens, and other improvements have been made to the environment surrounding IEOs.

There are currently four cases of IEOs in Japan. The first case, Palette Token (PLT), raised more than 900 million yen. According to the JCBA, the total amount of token sales in the four cases exceeds 4.4 billion yen.

However, since IEO is a new system, there are issues with the stability of token prices and the operation of the system in order for businesses and users to use it with confidence.

The ICO/IEO Subcommittee of the JCBA has been discussing the IEO system since May of this year, mainly with businesses that have knowledge of crypto assets and Web 3.0.

JCBA argues that by establishing price stabilization and sales restrictions in Japan's IEO system, it will be possible to encourage users to manage their own assets under domestic regulations rather than using overseas exchanges, which will also lead to user protection.

This proposal is an initial proposal that JCBA has discussed alone. In the future, we will continue to discuss and verify with each related organization whether it is feasible within the scope of self-regulatory rules.

JCBA has listed the following as its four agendas for reforming the IEO system.

1. : Price calculation: Diversification of calculation methods and clear statement of caution regarding prices
2. : Liquidity: Setting liquidity targets at the time of listing and creating an environment in which liquidity can be secured
3. : Stabilization operations: Establishment of rules regarding price stabilization measures at the time of listing
4. : Selling restrictions: Institutionalization and strictness of lock-ups for issuers and underwriting exchanges"

In addition, the submitted materials also included the direction of discussion on creating an environment for the soundness of IEOs.

Yoshida Seihiro, chairman of the ICO/IEO division of the JCBA, said about the development of the IEO system, "While it has the potential to accelerate the development of Japan's Web 3.0 industry, issues are becoming apparent as it is still in its early days." He then stated his intention to have all parties involved work together to establish self-regulatory rules in the future.

Reference:Announcement
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