JAPAN Law and Practice Contributed by: Keisuke Hatano, Takeshi Nagase, Takato Fuki and Tomoaki Katayama, Anderson Mori & Tomotsune
environment for the promotion of Web3, including the use of NFTs and decentralised autonomous organisa- tions (DAOs) based on blockchain technology. The Web3 project team of the Digital Society Promo- tion Headquarters of the Liberal Democratic Party’s Policy Research Council also published the “Web3 White Paper 2024” on 21 May 2024, followed by the “Web3 White Paper 2025” in May 2025, address- ing various issues related to the promotion of Web3, including blockchain-based businesses. There is no general legal framework in Japan that directly regulates blockchain technology itself (where no crypto-assets are involved). If a business using blockchain technology falls within a regulated indus- try, the relevant industry-specific regulations, eg, the Banking Act or the FIEA, will apply; and if the data being handled constitutes personal information, the Act on the Protection of Personal Information (APPI) and related regulations will apply. With respect to the APPI in particular, the use of block- chain technology raises certain specific issues. Given that a public blockchain involves sharing a database among unspecified participants and that information recorded on the blockchain cannot, in principle, be deleted or retracted, the use of blockchain technol- ogy may pose compliance challenges under the APPI. For example, Article 22 of the APPI requires business operators that handle personal information to endeav- our to delete unnecessary personal information once the required purposes have been achieved. However, a business operator that records its users’ personal information on a blockchain may have difficulty delet- ing it, which could result in a breach of this obligation under the APPI. 1.1.4 Smart Contracts There is no clear definition of “smart contracts” under Japanese law. There is also no specific regulation for “smart contracts” in Japan. “Smart contracts” are generally understood to be self- executing contracts whose terms are predetermined by specific programming code on the blockchain. The use of “smart contracts” may raise issues in terms
of their validity and enforceability as legal contracts. However, these issues may be offset by the fact that smart contracts are effectively enforceable regardless of their legal validity. For instance, a “smart contract” will be automatically enforced and irrevocable, even if it is invalid or unen- forceable for violating applicable law. There is cur- rently no judicial precedent in Japan addressing the legal enforceability of these “smart contracts”. 1.1.5 Industry and Trade Bodies For the purposes of ensuring the proper provision of the Crypto Asset Exchange Service (CAES) and the Electronic Payment Instruments Exchange Ser- vice (EPIES) and to protect the users of those ser- vices, the Japan Virtual and Crypto assets Exchange Association (JVCEA) was appointed as an approved self-regulatory organisation to regulate Crypto-Asset Exchange Service Providers (CAESPs) and Electronic Payment Exchange Service Providers (EPIESPs). The primary objectives of the JVCEA are to: • formulate self-governance rules; • inspect its members to ensure they are complying with the relevant self-governance rules; and • handle user complaints. 1.2 Crypto-Assets 1.2.1 Property Considerations Under Japanese law, ownership rights generally do not apply to crypto-assets that lack a physical form. Therefore, while wrongful interference with control over crypto-assets, such as through hacking, may give rise to a tort claim for damages, a claim for return based on ownership would not be available. As ownership rights do not apply to crypto-assets, the legal concept of a “transfer of ownership of cryp- to-assets” also does not exist. In practice, however, the transfer of tokens on a blockchain is treated as a transfer of the crypto-assets themselves. For this same reason, a security interest cannot be created over crypto-assets themselves. However, if crypto-assets are deposited with a custodian, it is possible to create a pledge or similar rights over the claim to recover them from the custodian. It is there-
364 CHAMBERS.COM
Powered by FlippingBook