Fintech 2025

JAPAN Law and Practice Contributed by: Ken Kawai, Shunsuke Aoki, Takeshi Nagase and Keisuke Hatano, Anderson Mori & Tomotsune

1. Fintech Market 1.1 Evolution of the Fintech Market Evolution of the Japanese Fintech Market During the past few years, there have been notable developments in the non-fungible token (NFT) sector and the digital securities’ sector – as well as in respect of “buy now pay later” (BNPL) services. NFT-related businesses have been popular since late 2020, especially in the online gaming sector. In addition, content holders, digital artists and advertising agencies have rushed to these new markets. Digital security businesses gained traction in 2021, with their main focus on digital corpo - rate notes and tokenised equity interests in real estate funds. Among mobile payment services, BNPL services have been growing rapidly in tandem with the development of this business abroad. Trends for 2025 On 4 March 2022, the Bill for Partial Amendment to the Act on Payment Services Act, etc, for the Purpose of Establishing a Stable and Efficient Funds Settlement System (the “Amendment Act” ) was submitted to the Diet. It was approved on 3 June 2022, and subsequently came into effect in June 2023. The Amendment Act aims to establish a stable and efficient funds settlement system that is responsive to the digitalisation of finance and other fields against the backdrop of: • a rise in issuance and circulation of stable - coins overseas; • growing needs for improvement in transaction monitoring by banks, etc; and

• the increasing prevalence of prepayment instruments that enable payment by elec - tronic means. In connection with the rise in issuance and circu - lation of stablecoins overseas, the Amendment Act also introduced the concept of “electronic payment instruments” (EPIs), which corresponds to the concept of stablecoins (Article 2, para - graph 5 of the Amended Payment Services Act (Amended PSA)). Under the Amended PSA: • stablecoins that are redeemable for fiat cur - rencies (fiat-backed stablecoins) are regulat - ed as EPIs, while non-fiat-backed stablecoins such as DAI will continue to be regarded as crypto-assets; • only banks, fund transfer services provid - ers, trust banks and trust companies that are licensed or registered in Japan may issue EPIs directly to residents of Japan; • an entity is required to obtain a licence as an electronic payment instruments transaction service provider (EPI-TSP) if, as a business, it: (a) sells or buys EPIs; (b) acts as an intermediary, a broker or an agency of sales and purchases of EPIs; or (c) provides custody services of EPIs, as a business; • an EPI-TSP is subject to AML/CFT regula - tions, including the travel rule; • an EPI-TSP that continuously sends or receives EPIs to or from overseas virtual asset service providers (VASPs) must check whether such VASPs are conducting appro - priate due diligence of users for AML/CFT purposes; and • an EPI-TSP must segregate users’ EPIs from its proprietary assets.

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