Both cryptocurrencies and securities are financial assets, and the relationship between cryptocurrencies and securities mainly stems from their issuance and function in ICOs. In ICOs, cryptocurrencies are used to raise traditional funds. ICOs are typically held by companies seeking to raise funds for blockchain-related or other online projects.
They raise funds by issuing cryptocurrencies, allowing holders to use new systems or software, or share in the profits generated. The U.S. Securities and Exchange Commission previously determined that Bitcoin and Ethereum are currencies, while most ICOs are securities. The Japan Securities Association and the Japan Financial Services Agency plan to classify virtual currencies as financial products and be subject to the Financial Products Exchange Act.
Therefore, no matter what the characterization is, it is ultimately related to the underlying assets corresponding to the cryptocurrency. If it represents income or other rights and interests, it will be subject to securities legal supervision; if it is only used as a trading target, similar to gold, non-ferrous metals, etc., then it may Classified as financial derivatives and subject to other types of financial legal supervision.
Of course, if a digital currency tends to be used in the indirect financing market, its monetary attributes will of course be stronger; and if a digital currency is more used in the direct financing market, of course its security attributes will be stronger. Japan classifies virtual currencies as financial commodities and is subject to the Financial Products Transaction Act. Its regulatory philosophy goes further and it also proposes specific regulatory measures.