The Amended Payment Services Act has made the regulations imposed on businesses when operating crypto asset exchange even stricter.
Specifically, the following five items are included in the scope of the law.
In the following sections, we will summarize the main points of the Amended Payment Services Act in regard to these five regulations.
A) Registration as a crypto asset exchange operator is now mandatory for operating crypto asset custody businesses.
According to the Amended Payment Services Act , operations concerning the management of users' crypto-assets and transfer of crypto-assets to addresses designated by users based on their intentions (i.e., crypto-asset custody operations) newly fall under the category of crypto-asset exchange business. Therefore, a registration as a crypto-asset exchanger is now mandatory for custodians to conduct their operations.
Other typical businesses that fall under the category of a crypto-asset exchanger include "exchanges" that mediate the purchase and sale of crypto-assets between customers, "sales offices" that act as a party to purchase and sell crypto-assets to customers, and businesses that manage private keys of crypto-assets held by users (wallet services) (Article 2, Paragraph 7, Item 4 of the Amended Payment Services Act).
B) Reasons for refusal of registration as a crypto-asset exchange business were added.
1.Subscription and internal rules creation is now mandatory.
The following two points have been made mandatory as registration requirements for virtual currency exchangers under the Amended Payment Services Act.And these non-compliances have been added as new reasons for registration refusal, which are stated as follows:
Creation of internal rules that are equivalent to the articles of incorporation and other rules of the Association of Certified Funds Settlement Business Associations
Establishment of a system to ensure compliance with the relevant internal rules
As a result, it can be said that in order to operate a crypto asset exchange business, it has become a legal obligation to join the Japan Virtual and Crypto Assets Exchange Association (JVCEA) and create internal rules equivalent to self-regulation. (Article 63-5, Paragraph 1, Item 6 of the Amended Act on Settlement of Funds).
2.Addition of capital requirements for registration
As a requirement for registration as a virtual currency exchanger, a lack of a certain financial basis may also be a reason for refusal of the registration. A certain financial basis is usually measured by the following two criteria (Article 9, Paragraph 1 of the Cabinet Office Ordinance on Crypto Asset Exchangers)
the amount of capital must be over 10 million yen
the value of net assets is not negative
C) Prior notification is now required when changing the name of the crypto-assets used.
Under Payment Services Act prior to the amendment, any change in the information on the application form for registration required subsequent notification.However, under the Amended Payment Services Act, prior notification is required, in principle, for any changes to either "the name of the crypto-assets used" or "the contents and methods of the crypto-asset exchange business" in the application for registration.The following three items are not subject to prior notification.
1. Suspension of crypto assets usage 2. Granting of new cryptographic assets to the relevant cryptographic asset holder due to a change in the technology or specifications in the cryptographic assets used.
3. Changes other than in the items concerned in the content or method of the cryptographic asset exchange business.
D) The content and prohibited items to be displayed in advertising solicitations have been made clear.
Under the Payment Service Act before the amendment, there were no specific regulations on advertising and solicitation by virtual currency exchangers. However, according to the Amended Payment Services Act, the following five points must be stated when issuing an advertisement solicitation.
1.trade name of the cryptographic asset
2. that one is a crypto asset exchanger and its registration number
3.that the cryptographic asset is not in Japanese or foreign currency
In addition, the following two points are important requirements that affect the nature of cryptographic assets and the decisions of service users, and as stipulated by the Cabinet Office Ordinance, they must also be listed.
4.If there is a risk of direct loss as a direct result of changes in the value of the cryptographic assets, a statement about that and the reason for such loss.
5.Crypto assets may be used for reimbursement of the price only with the consent of the person receiving the reimbursement of the price.
On the other hand, the following four points are prohibited in advertising solicitation.
1.In concluding a crypto-asset exchange agreement, making false representations or misrepresenting the nature of the crypto-asset, the counterparty type or other matters specified by Cabinet Office Ordinance.
2.Making false representations or misrepresenting the counterparty type when advertising.
3.When concluding a Crypto Asset Exchange Contract etc., or when advertising its Crypto Asset Exchange Business, making any representation that encourages the purchase or sale of a Crypto Asset or the exchange of a Crypto Asset with another Crypto Asset for the sole purpose of making a profit, rather than for the purpose of using it as a means of payment.
4. Acts specified by a Cabinet Office Ordinance as those that may be inadequate for the protection of users of the Crypto Asset Exchange Business or that may hinder the proper and reliable execution of the Crypto Asset Exchange Business.
E) The obligation to protect user property has been made clear.
Under The Amended Payment Services Act, crypto-asset exchangers are required to manage users' money separately from their own money and entrust it to trust companies, etc. (addition of trust obligations). In addition, it has become necessary to manage at least 95% of customers' crypto assets using the method (cold wallet etc.) stipulated in Article 27, Paragraph 3 of the Cabinet Office Ordinance on Crypto Asset Exchangers. The other 5% or less can be managed in other ways (hot wallets). When conducting crypto asset margin tradings etc., a crypto asset exchanger is required to register as a money lending business when lending money to users.