JAPAN Law and Practice Contributed by: Ken Kawai, Shunsuke Aoki, Takeshi Nagase and Keisuke Hatano, Anderson Mori & Tomotsune
• cases where the provision concerned is used for determining the basis for disposition of an applica - tion (as the term “application” is defined in Article 2, Item 3 of the Administrative Procedures Law (Law No 88, promulgated 12 November 1993)) and violations of the provision concerned are subject to penal sanctions; • cases where the provision concerned is used for determining the basis for identifying activities that require notification of certain matters to admin - istrative agencies and violations of the provision concerned is subject to penal sanctions; • cases where the provision concerned is used for determining the basis for unfavourable disposition (as the term “unfavourable disposition” is defined in Article 2, Item 4 of the Administrative Procedures Law); and • cases where the provision concerned imposes obligations on private companies or restricts their rights directly, with or without unfavourable dispo - sition, where the FSA finds it necessary. In principle, the director of the relevant section of the administrative agency that receives the inquiry will issue a response to the inquiry within 30 days of receipt of a written inquiry from the inquirer at the contact point. However, there are circumstances in which the timeframe exceeds 30 days, as discussed below. The FSA is required to ensure that its response time, including the period for submitting additional or corrected documents, is as short as possible. • In cases where the inquiry involves advanced finance techniques or technology, and for which a response requires careful judgment, the FSA will issue a response within 60 days (in principle) of its initial receipt of the inquiry. • In cases where the quantity of inquiries exceeds the specific section’s capacity to issue timely responses, a response will be issued within a rea - sonable time period exceeding 30 days. • In cases where the regulations/laws in question are jointly administered by the FSA and another gov - ernment agency, a response will be issued within 60 days (in principle) of initial receipt of the inquiry. If the FSA is unable to issue a response to an inquiry within 30 days, the FSA will notify the inquirer of the
reason for the delay and the expected timeframe for its response. 2.8 Outsourcing of Regulated Functions Under Japanese law, when a business operator engag - ing in a regulated business outsources part of its busi - ness, it is obliged to conduct proper supervision of the outsourcee in accordance with applicable laws and regulations. By way of example, when outsourcing part of its CAES to a third party (including outsourc - ing in two or more stages), a CAESP regulated under the PSA is required to supervise such third party and take such other necessary measures to ensure proper and reliable execution of the outsourced functions. 2.9 Gatekeeper Liability Under Japanese law, providers of fintech-related services are responsible as gatekeepers within the scope of the applicable regulations – for example, as a gatekeeper providing a platform for the exchange of fiat currency and crypto-assets, CAESPs are sub - ject to various obligations concerning user protection and AML/CFT. Specifically, from the viewpoint of user protection, CAES providers are obligated to provide certain information to users. In addition, from an AML/CFT perspective, CAESPs are required – as specified business operators under the APTCP – to take steps to ascertain certain infor - mation when commencing transactions with users. 2.10 Significant Enforcement Actions The upsurge of the Japanese crypto-asset market was stalled in January 2018 when one of the largest CAES providers in Japan announced losses of approximate - ly USD530 million due to a cyber-attack on its net - work. This hacking incident prompted inspections of CAESPs by the FSA, which found internal weakness - es in most of the inspected entities – particularly in the areas of AML/CFT and cybersecurity. As a result, business improvement orders or business suspension orders were issued to these entities. In addition, it was reported in November 2022 that FTX Trading Limited (FTX Trading) – the parent com - pany of FTX Japan KK, which is a CAESP and a Type I FIBO – had been experiencing financial problems. In light of the capital and business relationship between
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