JAPAN Law and Practice Contributed by: Ken Kawai, Shunsuke Aoki, Takeshi Nagase and Keisuke Hatano, Anderson Mori & Tomotsune
2.13 Conjunction of Unregulated and Regulated Products and Services A non-fungible token (NFT) is not defined under Japa - nese regulation. However, it is generally understood to refer to an irreplaceable token minted on a blockchain. Since NFTs are digital items minted on a blockchain, the question is whether NFTs also constitute crypto- assets under the PSA. NFTs are increasingly being used in various fields because, although they are digital data generated on a blockchain, they are characterised as irreplaceable owing to the unique values assigned to them. NFTs are unlikely to constitute crypto-assets if: • the specifications or functions of NFTs are limited in the same manner as trading cards and in-game items; and • NFTs do not serve economic functions (such as being a means of payment) in the way that crypto- assets do. See 10.12 NFTs for further details. 2.14 Impact of AML and Sanctions Rules In Japan, AML rules are regulated by the APTCP. The APTCP requires “specified business operators” to conduct KYC and the like. The term “specified busi - ness operators” refers to business operators like fin - tech companies (among others) that are subject to financial regulations. The APTCP is not directly applicable to unregulated fintech companies that do not fall within the defini - tion of “specified business operators”. Accordingly, the AML policies (if any) of such unregulated fintech companies would only be those they have established on their own initiative. Travel Rule When a CAESP or EPI-TSP transfers digital assets to a customer of another CAESP or EPI-TSP (including any foreign CAESP or EPI-TSP) at the request of a customer, the transferring CAESP or EPI-TSP must notify the receiving CAESP or EPI-TSP of the identifi - cation information, including the name and blockchain address, pertaining to the sender and the receiver
FTX Trading and FTX Japan KK, the FSA issued a business suspension order and a business improve - ment order to FTX Japan KK, citing the need to: • immediately halt new transactions by users; and • take all possible measures in order to prevent the flow of FTX Japan KK’s assets to affiliated compa - nies outside Japan and subsequent harm to users’ interests. Further, on 31 May 2024, an incident occurred at DMM Bitcoin, a CAESP, in which 4,502.9 BTC entrusted to it by its customers was illegally leaked. As a result, a business improvement order was issued to DMM Bitcoin on 26 September 2024, under which DMM Bitcoin was required to investigate and analyse the specific facts and root causes of the leakage, respond to customers and ensure proper and reliable business operations going forward. 2.11 Implications of Additional, Non- Financial Services Regulations The Act on the Protection of Personal Information (APPI) is a principle-based regime for the processing and protection of personal data in Japan, which gen - erally follows the eight basic principles of the OECD Guidelines on the Protection of Privacy and Trans - border Flow of Personal Data. The APPI is applicable to all private businesses, including fintech business operators. Based on the requirements of the APPI, every governmental ministry in Japan issued admin - istrative guidelines applicable to the specific industry sectors under its supervision. Fintech businesses are required to comply with the “Guidelines on Personal Information Protection” that concern the financial ser - vices industry. 2.12 Review of Industry Participants by Parties Other Than Regulators In Japan, accounting/audit firms are the only entities that review the activities of industry participants. For some industries, however, self-regulatory organisa - tions also conduct reviews separately from regulators or accounting/audit firms under the applicable laws or regulations. By way of example, the JVCEA is a self- regulatory organisation authorised under the PSA to review its CAESP members.
440 CHAMBERS.COM
Powered by FlippingBook