JAPAN Law and Practice Contributed by: Ken Kawai, Shunsuke Aoki, Takeshi Nagase and Keisuke Hatano, Anderson Mori & Tomotsune
• a Tokumei Kumiai, a partnership formed pur - suant to the Commercial Code; or • an offshore fund, including a Cayman lim - ited partnership, because of its flexibility in structuring the scheme while mitigating any regulatory risks. On the other hand, an investment trust fund under the Investment Trust and Investment Corporation Act may not be used as a vehicle for investment in crypto-assets or crypto-asset exchange-traded funds, because, currently, crypto-assets are excluded from the specified asset classes in which an investment trust fund is allowed to invest under the Act. Funds Investing in Digital Securities In general, the operator of an investment fund that mainly invests in securities and derivatives must register as an investment management business operator. 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 securi - ties (including digital securities) and if the number of investors 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- solicitation as described previously will also be applicable to a fund investing in digital securi - ties. 10.11Virtual 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 unspecified person – limited to that recorded on electronic devices or other objects by electronic means and excluding Japanese and other foreign currencies, cur - rency denominated assets and EPIs (exclud - ing currency denominated assets) (the same applies in the following item) – and that may be transferred using an electronic data pro - cessing system (collectively, Type I crypto- assets); or • proprietary value that may be exchanged reciprocally for proprietary value specified in the preceding 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 denomi- nated in Japanese or other foreign currency. Such assets do not fall within the definition of crypto-assets. For example, prepaid e-mon - ey cards are usually considered currency denominated assets. 10.12Non-Fungible Tokens (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 context 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 Guidelines, 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 socially accepted norms.
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