JAPAN Law and Practice Contributed by: Ken Kawai, Shunsuke Aoki, Takeshi Nagase and Keisuke Hatano, Anderson Mori & Tomotsune
pany engaging in these transactions needs to undergo registration as a Type I Financial Instru - ments Business Operator (Type I FIBO). In addition to various rules of conduct appli - cable to those Type I FIBOs providing crypto- asset derivative services under the FIEA, it is noteworthy that the amended FIEA introduced strict leverage ratio regulations. If a Type I FIBO engages in crypto-asset derivative transactions, the amount of margins to be deposited by a cus - tomer must: (i) if the customer is an individual, not fall below 50% of the amount of crypto-asset derivative transactions (ie, the leverage ratio is limited to two times); or (ii) if the customer is a corporation, not fall below the amount of crypto- asset derivative transactions, multiplied by 50% or the crypto-asset risk assumption ratio based on the historical crypto-asset volatilities as specified in the public notice issued by the FSA entitled “Establishing the Calculation Method for Crypto Asset Risk Assumption Ratio in Crypto Asset Margin Trading” . 10.9 Decentralised Finance (DeFi) “DeFi” is an abbreviation of decentralised finance. DeFi refers to a decentralised financial system consisting of blockchain applications (generally referred to as decentralised applica - tions, or “Dapps” ). It is a general term for finan - cial systems and projects that are accessible and transparent to the general public. The terms and degree of decentralisation would vary from project to project. There are no regulations relating specifically to DeFi in Japan. However, where DeFi activities fall within regulated activities under any existing law, such activities may be subject to the relevant regulations. By way of an example, within the scope of DeFi, DEXs may be subject to regu - lations relating to CAES as an intermediary for
the sale or exchange of crypto-assets under the PSA. See 6.6 Rise of Peer-to-Peer Trading Plat- forms for further details. 10.10Regulation of Funds Crypto-Asset Investment Funds Funds in the form of collective investment schemes that invest in crypto-assets are sub - ject to the same rules and regulations as other investment funds that take the form of a partner - ship. Therefore, in order to solicit investments, the operator of the fund must register as a Type 2 FIBO unless: • there are no more than 49 non-professional investors with one or more professional inves - tors and notification in connection therewith has been made to the FSA; or • the fund delegates its solicitation and market - ing activities to a registered Type 2 FIBO. The operator of a fund that mainly invests in crypto-assets is not required to register as an investment management business operator because that registration obligation is only trig - gered when an operator mainly invests in securi - ties and derivatives. In addition, investment in crypto-assets by the operator of a fund is not likely to trigger the requirement to register as a CAESP under the PSA because the trading of crypto-assets for the fund’s own investment purposes is not con - sidered to be the trading of crypto-assets “as a business” , which is one of the requirements for the registration obligation. In Japan, the typical and most practical legal forms adopted by such crypto-assets invest - ment funds would be:
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