Cryptocurrencies have exploded in popularity in recent years, thanks to innovation in blockchain, the distributed ledger technology underpinning those virtual tokens such as bitcoin.
That has led to a red-hot fundraising trend where start-ups are pulling in millions of dollars in capital by issuing virtual coins to investors in exchange for money.
As a result, there is renewed interest from regulators in Singapore, the United States, Japan and China to have oversight in the cryptocurrency space and curb the potential of widespread money laundering and fraud. But some worry that too many rules could potentially deter firms from innovating on the blockchain.
On Wednesday, Japanese media reported that the country is set to introduce regulatory oversight on cryptocurrency exchanges in October. The challenges that authorities need to figure out include settling on accounting rules for virtual currencies and deciding how to handle initial coin offerings (ICOs), according to the Nikkei business daily.
Earlier this month, Chinese authorities said ICOs, which have become a primary means of fundraising for projects that are built on blockchain technology, are now illegal in the country.
Chinese regulators called ICOs unauthorized illegal fundraising activity and recent reports indicated they have clamped down on local bitcoin exchanges. Bitcoin is the most commonly used cryptocurrency.
"The only way you can really stop bitcoin in China completely is if you shut down the internet. So the regulators are really focused on the points where bitcoin hits fiat currency," Zennon Kapron, founder and director at consultancy firm Kapronasia, told CNBC's "Squawk Box" on Wednesday.