JAPAN Law and Practice Contributed by: Ken Kawai, Shunsuke Aoki, Takeshi Nagase and Keisuke Hatano, Anderson Mori & Tomotsune
6.3 Impact of the Emergence of Cryptocurrency Exchanges
6.4 Listing Standards The criteria for the listing of crypto-assets by CAESPs is set out not in the PSA, but in the “Rules on Handling of New Crypto-Assets” formulated by the JVCEA. Specifically, CAESPs must carefully determine wheth - er it is appropriate for them to handle crypto-assets if the relevant crypto-assets have any of the following characteristics (per the JVCEA Pre-Assessment): • the crypto-asset is being used or will likely be used in a way that violates laws, regulations, or princi - ples of public order and morals; • the crypto-asset is used or will likely be used for criminal purposes; • the crypto-asset is used or will likely be used for money laundering or terrorist financing; • the crypto-asset presents significant impediments or concerns to the updating or maintenance of transfer or retention records; • the crypto-asset issuer is unable or unwilling to be properly audited by a chartered accountant or an audit firm; or • the crypto-asset cannot be managed or disbursed in a systematic or otherwise secure manner (or it will be difficult to do so). In addition, as of 26 December 2022, the JVCEA self- regulatory rules were amended to introduce a system to relax the handling of new crypto-assets by member CAESPs. Specifically, two systems were introduced: • a “Green List System” to exempt certain member CAESPs (Green List Eligible Members) from the JVCEA Pre-Assessment for certain prescribed crypto-assets; and • a Crypto-Asset Self-Check System to exempt certain member CAESPs from the JVCEA Pre- Assessment except in specific cases. Under the Green List System, crypto-assets are des - ignated by the JVCEA on the home page of its web - site as “crypto-assets widely handled in Japan” and crypto-assets for which JVCEA Pre-Assessment is not required when handled by a Green List Eligible Member if they meet all of the following four criteria:
Japan has emerged as one of the largest global cryp - to-asset markets and was the first country to estab - lish a regulatory framework for crypto-assets. Besides enabling the registration of CAESPs wishing to provide CAES to residents in Japan, such framework seeks to protect customers of CAESPs and prevent crypto- related money laundering and terrorism financing. Under the PSA, CAESPs are required to: • take such measures necessary to ensure the safe management of information available to them; • provide sufficient information to customers; • take such measures necessary for the protection of customers and for the proper provision of services; • segregate the property of customers from their own property and subject such segregation to regular audits by a certified public accountant or audit firm; and • establish internal management systems to enable the provision of fair and appropriate responses to customer complaints, as well as implement meas - ures for the resolution of disputes through financial ADR proceedings. It should be noted that a CAESP is required under the PSA to both manage the money of users separately from its own money and to entrust users’ money to a trust company or any other similar entity in accord - ance with the provisions of the relevant Cabinet Office Ordinance. In other words, a CAESP is required to not only manage the money of users in bank accounts separately from its own, but also to entrust such mon - ey to a trust company or trust bank acting as trustee. In addition, the FIEA prohibits, with penalties, unfair acts in crypto-asset trading (without limitation as to the victims of such acts) for purposes of protecting users and preventing unjust gains. However, insider trading regulations have not been included within the scope of the FIEA because of the difficulties in identi - fying issuers and undisclosed material facts pertaining to crypto-assets.
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