The coming age of ICOs? #02 Aerial Partners CEO Kento Numasawa “We need to be able to audit ICOs from a technical perspective”

The coming age of ICOs? #02 Aerial Partners CEO Kento Numasawa “We need to be able to audit ICOs from a technical perspective”

As an accounting and tax expert knowledgeable about cryptocurrency, Kento Numasawa has supported various blockchain businesses, including the ALIS Project’s ICO. In this series entitled “The coming age of ICOs? Asking the experts,” we seek out a variety of perspectives on the ICO phenomenon. This time, we asked Mr. Numasawa, who was one of the first on the cryptocurrency scene and an ongoing entrepreneur, about the potential and challenges of ICOs.

Realizing the challenge of cryptocurrency taxes through social media

Numasawa: I became involved in cryptocurrency in my work at the beginning of 2017. The cryptocurrency trading license system was being launched and I provided support for registration. I was also investing in cryptocurrency personally but was concerned by the complexity of the tax process. Bitcoin was gaining attention around the world and more and more private investors were getting involved, but I suspected that support would be needed for the extremely complicated income tax calculations.


I began sharing cryptocurrency tax information in June from a Twitter account called “2nd chick” (@2nd_chick)  but was flooded with inquiries – far more than I could handle on my own. Feeling a strong need for a framework, I developed and released “Guardian” and “G-tax” to help private investors file their taxes. At that time, there were hardly any accounting/tax experts active primarily in the cryptocurrency space, so I received inquiries from all kinds of blockchain-related parties, whether they had ICOed or not.

 Open fundraising eliminates barriers to corporate activities

I see great potential in ICOs as an “open fundraising method”. Until now, there have been effectively no means for directly supporting undisclosed venture companies or offering cross-border support. In 2017, the amount of funds raised through ICOs exceeded the amount of funds raised from venture capital. The amount of ICO funding in 2018 has already exceeded the amount in 2017. This shows just how much attention ICOs are attracting.

Kento Numasawa: CEO, Aerial Partners Inc.

Furthermore, if issuing tokens can form communities driven by investors and users, like the ALIS Project, then it has potential not just as a method of fundraising but as a way of doing business in a new era. In the past, business was conducted with companies, clients, and investors divided. Now, however, people who are simultaneously investors, users, and supporters form communities around the operational team, and it is within this context that products are improved and new functions are developed. We’re extremely interested in whether this can be a new form of corporate activity not bound by physical distance or contracts or impeded by various other barriers.

 The challenge is the gap between ICO teams and investors

At the same time, because it is new, laws and institutions lag behind. The ease of fundraising also facilitates illicit usage. ICOs are a means of raising funds, so the expectations of those giving and those receiving should match. Currently, however, that part is often ambiguous.


The ones doing the ICO need funds to execute their project. But do the ones participating in the ICO want to obtain monetary returns, simply support the project, or something else? Therein lies a gap in understanding. If the ICO team does not strive to thoroughly disclose information and fill this gap, the market is distorted. This is a big challenge for ICOs, but solutions such as DAICO do exist. I offer such advice to the ICO projects that I’m involved in and hope to cooperate with endeavors that can serve as models.

 Shortage of people that can help with accounting and taxes

There are not enough people in the ICO and cryptocurrency field that can offer support to businesses in accounting and taxes, so we established an organization called the Japan Cryptocurrency Tax Association (JCTA) and are working to train experts. The lack of legislative progress is also an issue, but the greater problem is the lack of experts. For starters, there is not sufficient understanding of cryptocurrency and blockchains. Without support personnel, businesspeople cannot confidently devote their full effort to business activities.


JCTA hopes to accumulate knowledge through actual work and serve as a point of contact with the authorities. Looking at the content being discussed at the FSA’s expert meetings, I cannot help but feel that they are not keeping up with the new challenges arising in practice. Currently, venture companies at the forefront of technology and business are working on the social implementation of blockchains. Meanwhile, the industry organizations involved in legislative development with the authorities are mainly people from the finance world. At this rate, there is a risk that the legislative process will ignore the crucial opinions of venture companies.

 Japan ICOs facilitated by exchanges

In 2017, Japan was praised by the rest the world for pioneering a cryptocurrency trading license system. But now, only licensed traders can do ICOs, creating internal control rules that are tough for venture companies to follow. Of course, it’s not as if the authorities are doing nothing – presumably they too still want to lead the world. However, the FATF’s (Financial Action Task Force) fourth evaluation (4th Round of Mutual Evaluations) is scheduled for 2019, and global priority must be given to anti-money laundering measures, so the dilemma that Japan faces is that in order to improve its position as a country, it cannot think only about the cryptocurrency industry.


Nevertheless, legislation is underway to allow ICOs to be conducted in Japan in a manner facilitated by licensed traders, but what I would really like to see in the near future is the FSA remove one step from its examination, ease up on licensed trader measures, and allow ICOs through exchanges. If ICOs through exchanges became possible, the focus would shift to which ICO projects to take on. They would need to ask how the quality, soundness, and future potential of these various projects should be evaluated. We hope to be able to support that aspect in cooperation with legal experts as well.


To have exchanges facilitate ICOs would put them at the center of the system, contravening the original decentralized concept of blockchains and ICOs. However, if the law were laid down in this way, we would need to go forward under these rules.

 Appropriate technical evaluation required for sound ICO development

Some are of the opinion that tightening ICO standards will raise the bar for venture companies and hinder innovation. However, if exchanges are to take on the risk of handling ICOs, auditing is critical. Although standards for auditing are under discussion, at least a certain level must be secured. Presumably fundraising will not be possible simply because the content and ideas within the white paper are good, as has been the case so far.


The question is how to audit technical aspects such as smart contracts and token issuance. In an IPO (stock listing), one can determine that there are no problems by looking at the numbers – the fundamentals. In addition, in the stock market, there are accountants, securities companies, stock exchanges, and neutral rating agencies that compose the system.

Kento Numasawa: CEO, Aerial Partners Inc.

In an ICO, technical evaluation is essential, and any audit that does not do this appropriately is insufficient, but currently it is difficult for private investors to make technical evaluations, so they supplement this with the achievements and the name recognition of the founders and advisers. As a result, the more famous the faces on the white paper, the easier the money flows in. However, this is also a cause of the gap between entrepreneurs and investors. If we can properly evaluate whether there is the technical ability to carry out the project, we should be able to reduce this gap.


There will likely be a need for something in the future that can audit and evaluate ICO projects, including their technical feasibility, and indeed projects looking to meet this need are already appearing both in Japan and abroad.

 Payment and securities tokens the keys to penetration

The arrival of decentralization, distributed society, libertarian thought, and new economics replacing old economics – these are often discussed in the same breath as blockchains, and I agree to an extent. However, old economics and new economics are not binary, conflicting concepts. It’s hard to imagine a scenario in which the era of old economics suddenly meets its demise and the era of new economics begins. I think of the blockchain not as a destructive technology but as a mechanism to make conventional mechanisms more efficient.


Old economics and new economics are two sets that partially overlap, like a Venn diagram. The transition from one to the other will be gradual and pass through the overlapping part. Or perhaps they’ll continue to coexist in a state of overlap. The capitalist economy and token economics, the monetary economy and credit economy – I’m very interested in what this overlap will look like, and I think it’s safe to say that the keys will be payment and securities tokens.


New concepts begin as speculation, grow into investments, and result in actual demand. In terms of actual demand, the one most familiar to us is payment – making it so that cryptocurrencies can be used to pay for things in stores. Right now, paying in cryptocurrency requires you to calculate tax, so even people in the industry don’t do it when they go out together. This does not lead to actual demand. In order to be rooted in actual demand, exceptions like small-sum payments must become easier.


Interview date: July 11, 2018

Editor: Makoto Nakazato

Photographer: Ayano Tomozawa


Kento Numasawa

CEO, Aerial Partners Inc.

Kento Numasawa joined KPMG AZSA LLC in February 2012. He was involved in auditing listed companies, conducting due diligence for M&As, supporting IPOs, etc. After leaving the company in August 2014, he founded Taskey Inc. In December 2016, he established Aerial Partners Inc. and became its CEO. He is also representative of Atlas Accounting Co., Ltd., which supports IPOs, does M&A due diligence, and IFRS introduction support, and chair of the Japan Cryptocurrency Tax Association.