The Overview of Amended Law related to Crypto Assets
The law on crypto assets was amended in May 2021. Prior to the amendment, the law related to crypto assets did not have clear rules in the blockchain industry. The revised law on crypto assets provides some solutions to the issues that have been discussed in the blockchain industry, such as the legal classification of custody and derivatives operations. Therefore, it is extremely important for blockchain businesses to understand the content of this amendment.
This article summarizes the main points of the amendment to the Act, which may directly affect participants in the blockchain market in Japan. I hope you will find this information useful when you develop your business related to crypto assets in Japan.
*we are not experts in the field of law. We cannot guarantee the legal accuracy and validity of the views expressed in this article. Thank you for your understanding.
The amendment was made due to the inadequate legal framework in Japan, which has not been able to keep up with the fast-growing blockchain industry. In addition, crypto currencies in Japan are currently used more for speculative transactions than as a means of payment. This is one of the reasons why the amendment was made, as there have been no appropriate regulations to meet the current situation. This section provides a more detailed explanation of the background on the revision.
As a result of the amendment, there are additional things that must be kept in mind when operating a crypto asset exchange business in Japan. The major changes include the mandatory registration of custody operations with crypto asset exchanges and the clarification of rules on how to manage crypto assets.
As a result of the amendment, the crypto asset derivatives business was classified as a Financial Instruments Business. In line with this, additional points to be noted as a Type 1 Financial Instruments Business have been added. Another major change is that the leverage level is now capped at 2x(Upper Limit), aimed at protecting investors and users. This section provides more detailed explanations of the regulations for crypto asset derivatives business.
If the tokens issued are classified as the crypto assets, holding the ICO falls under crypto asset exchange business and is subject to the Payment Services Act. As such, it will be regulated as a crypto-asset exchange business, which is specifically mentioned in Section 1.
With respect to security token issuers, which regulations they are subject to depends on the classification of the tokens they issue. If the tokens you issue fall under the category of crypto-assets, they can be regulated by the Funds Settlement Law. This section provides a more detailed explanation of security token issuers.
The purpose of this revision is to improve the reliability of financial functions and to protect their investors and users. Investors and users can now use the services more safely. On the other hand, the requirements for those who engage in business related to crypto assets have become more stringent. The blockchain industry is still a rapidly changing industry. As a result, the situation is expected to rapidly change in terms of legislation in the future.