Leading Japanese Law Firm Nagashima Ohno & Tsunematsu Provides Commentary on the New Payment Services Act for Cryptocurrencies
On March 15th 2019, a bill was submitted to the 198th session of the Diet to amend the Payment Services Act. The proposed bill would clarify digital securities in Japan.
A bill is being considered in the Diet which could have serious ramifications for security token offerings in Japan. Currently the Payment Services Act (PSA) defines “virtual currencies” but fails to properly categorize which of them would be considered securities.
According to the newly-proposed bill, any token that gives rights, interest, or dividends from funds would be regulated as securities. They would thus fall under the oversight of the Financial Instruments and Exchange Act (FIEA). Virtual currencies would be renamed “crypto assets.”
The Contents of the Bill
Japanese Law Firm Nagashima Ohno and Tsunematsu have put out an overview of the bill and the various areas of cryptocurrency law it touches on. These are some of the key points mentioned:
- All cryptocurrency exchanges must keep customer funds in “cold wallets” unless necessary for consumer convenience.
- All cryptocurrency exchanges will fall under “crypto asset exchanges” and be obligated to have know-your-customer protocol and report suspicious activities.
- Increased penalties for false advertising and solicitation of crypto assets.
- Promoting self-regulatory organizations which are certified by the government for seamless regulatory oversight.
If passed, the law would go into effect in June of 2020. The commentary by Nagashima Ohno and Tsunematsu provides no commentary on whether or not it will pass. Nonetheless, if it does, it would be a landmark law in a country that still has no legally addressed the security token question. This would be prescient given that STOs increased by 130% in Q1 2019.
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Image courtesy of Nagashima Ohno and Tsunematsu