JAPAN Law and Practice Contributed by: Ken Kawai, Shunsuke Aoki, Takeshi Nagase and Keisuke Hatano, Anderson Mori & Tomotsune
be used as a vehicle for investment in crypto-assets or crypto-asset exchange-traded funds. This is because crypto-assets are excluded from the specified asset classes in which an investment trust fund is allowed to invest under the ITICA. However, in April 2024, the Web3 Project Team of the Liberal Democratic Party published a white paper proposing an amendment to the regulations described above to enable the launch of spot crypto-asset ETFs using the investment trust fund scheme under the ITICA. This followed the trend of bans being lifted on spot Bitcoin ETFs in the United States and other countries outside Japan. In light of this and in line with the expected transition of crypto- asset regulations to the FIEA, under which crypto- assets are treated as investment assets (as described in 1.1 Evolution of the Fintech Market ), such amend - ments are highly anticipated. Funds Investing in Digital Securities In general, the operator of an investment fund that mainly invests in securities and derivatives must reg - ister as an investment management business opera - tor. Digital securities constitute securities under the FIEA, so investing in digital securities may trigger the registration obligation as described earlier. Also, if a fund expects to invest mainly in securities (including digital securities) and if the number of inves - tors acquiring fund interests is expected to be 500 or more, a disclosure obligation will be triggered under the FIEA when raising capital. The registration obligation with respect to self-solici - tation as described previously will also be applicable to a fund investing in digital securities. 10.11 Virtual Currencies The PSA defines “crypto-asset” and requires a person who provides CAES to be registered with the FSA. The term “crypto-asset” is defined in the PSA as: • proprietary value that may be used to pay an unspecified person the price of any goods, etc, purchased or borrowed or any services provided and may be sold to or purchased from an unspeci - fied person – limited to that recorded on electronic devices or other objects by electronic means and excluding Japanese and other foreign currencies,
currency denominated assets and EPIs (excluding currency denominated assets) (the same applies in the following item) – and that may be transferred using an electronic data processing system (collec - tively, Type I crypto-assets); or • proprietary value that may be exchanged recipro - cally for proprietary value specified in the preced - ing item with an unspecified person and that may be transferred using an electronic data processing system (Type II crypto-assets). “Currency denominated assets” means any assets that are denominated in Japanese or other foreign currency. Such assets do not fall within the defini - tion of crypto-assets. For example, prepaid e-money cards are usually considered currency denominated assets. 10.12 NFTs NFTs are generally non-substitutable tokens that are issued on a blockchain, with values and attributes unique to the token itself. A central issue in the con - text of NFTs is whether they constitute crypto-assets under the PSA, since NFTs, like crypto-assets, are tokens issued on the blockchain. In this regard, according to the Crypto-Asset Guide - lines, an important factor in determining whether a token constitutes a Type I crypto-asset is whether the token is “an asset that can be purchased or sold using legal fiat currency or crypto assets under social - ly accepted norms. Specifically, a token that satisfies items (i) and (ii) below” generally will not constitute a Type I crypto-asset. The same applies to the determi - nation of whether a token constitutes a Type II crypto- asset: • the issuer, etc, has made clear that the token is not intended to be used as a means of payment for goods, etc, to unspecified parties. This can be achieved by, for example, stating clearly in the terms and conditions of the issuer or its busi - ness-handling service provider, or in the product description, that use of the token as a means of payment to unspecified parties is prohibited, or that the token or related system is designed in a way that does not enable it to be used as a means of payment to unspecified parties); and
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