Practical cross-border insights into fintech law

Fintech2023
Seventh Edition
Contributing Editors:

Rob Sumroy & James Cook
Slaughter and May

Table of Contents

Expert Analysis Chapter
1

Strategic Cross-Border Mergers & Acquisitions in the Fintech Sector
Jonathan Cardenas, Esq., Immediate Past Chair, ABA Financial Services Technology Joint Subcommittee

Q&A Chapters
7

17

23

28
34

43
49

56

Australia
Gilbert + Tobin: Peter Reeves, Emily Shen &Meg Dalco
BahamasHiggs & Johnson: Christel Sands-Feaste,
Portia J. Nicholson & Kamala M. Richardson
BrazilPinheiro Neto Advogados: Bruno Balduccini,
Marcela Benhossi & Raíra CavalcantiBritish Virgin Islands
Appleby (BVI) Limited: Andrew Jowett & Stuart Fee
CanadaMcMillan LLP: Pat Forgione, Robert C. Piasentin,
Yue Fei & Isabelle GuevaraJapan
Chuo Sogo Law Office, P.C.: Koji Kanazawa,
Katsuya Hongyo & Shun Komiya

Malaysia
Shearn Delamore & Co.: Christina Kow & Timothy Siaw

174

Malta
GTG: Dr. Ian Gauci & Dr. Cherise Abela Grech

Denmark
Gorrissen Federspiel: Tue Goldschmieding,Morten Nybom Bethe & David Telyas

75

FranceBredin Prat: Bena Mara & Adrien Soumagne

116

153

Italy
Lener & Partners: Raffaele Lener, Salvatore Luciano
Furnari, Giuseppe Proietti & Antonio Di Ciommo

166

Estonia
Sorainen: Kätlin Krisak & Hetti Lump

103

147

Isle of Man
Appleby (Isle of Man) LLC: Claire Milne &Katherine Garrood

Colombia
Lloreda Camacho & Co: Santiago Gutiérrez,
Carlos Carvajal & Santiago Garzón Amaya

68

96

142

IrelandMatheson LLP: Ian O’Mara & Joe Beashel

160

62

90

132

Indonesia
Makes & Partners: Dr. Yozua Makes, Bernardus Billy &Rovan Gamaldi Saptari

China
Fangda Partners: Zhiyi Ren & Lily Yin

Egypt
Shahid Law Firm: Rehan El-Bashary

83

125

Germany
Hengeler Mueller Partnerschaft von Rechtsanwälten
mbB: Dr. Christian Schmies & Dr. Gerrit Tönningsen

180

189

198

207

Gibraltar
Triay Lawyers: Javi Triay & Jay Gomez
GreeceSioufas and Associates Law Firm: Marios D. Sioufas,
Aikaterini Gkana & Athanasia Vaiopoulou
Hong Kong
Slaughter and May: Vincent Chan
India
G&W Legal: Arjun Khurana, Anup Kumar &Manavi Jain

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225

Korea
Yoon & Yang LLC: Kwang-Wook Lee, Ju Yong Lee,
Yong Ho Choi & Min Seok Joo

MexicoLegal Paradox®: Carlos Valderrama &Arturo Salvador Alvarado Betancourt
Netherlands
De Brauw Blackstone Westbroek: Else Rowel &Marit van Zandvoort
Nigeria
Udo Udoma & Belo-Osagie: Yinka Edu,
Joseph Eimunjeze, Pamela Onah & Oluwatobi Akintayo
NorwayAdvokatfirmaet BAHR AS: Markus Nilssen,
Eirik Basmo Ellingsen & Sam Kronenberg
Philippines
Gorriceta Africa Cauton & Saavedra: Mark S. Gorriceta,
Kristine T. Torres, Liane Stella R. Candelario &Ma. Katrina Rafaelle M. Ortiz
Portugal
Uría Menéndez – Proença de Carvalho:
Hélder Frias & Domingos Salgado

Q&A Chapters Continued
235

243

Romania
VD Law Group: Sergiu-Traian Vasilescu & Luca Dejan
Jasill Accounting & Business: Flavius Valentin
Jakubowicz
Saudi Arabia
Hammad & Al-Mehdar Law Firm: Samy Elsheikh &Ghazal Tarabzouni

250

Singapore
KGP Legal LLC: Kenneth Pereire & Lin YingXin

256

Slovenia
ODI LAW: Suzana Bončina Jamšek & Jure Gorkic

262

272

Spain
Uría Menéndez: Isabel Aguilar Alonso &Leticia López-Lapuente
SwedenMannheimer Swartling: Anders Bergsten &Carl Johan Zimdahl

280
291

298

305

313
322

Switzerland
Bär & Karrer: Dr. Daniel Flühmann & Dr. Peter Ch. Hsu
TaiwanXirilaw Attorneys: Sabine Lin, Yen-Chou Pan,
Peter Lin & Maiya Mai
Turkey/TürkiyeÜnsal Law Firm: Burçak Ünsal, Hande Yılmaz &Alperen Gezer
United Arab Emirates
Afridi & Angell: James Bowden, Zaid Mahomed &Alex Vromans
United Kingdom
Slaughter and May: Rob Sumroy & James Cook
USA
Manatt, Phelps & Phillips, LLP: Brian S. Korn,
Benjamin T. Brickner & Bernhard J. AlvineChapter 22

Japan

Japan
Koji Kanazawa

Katsuya Hongyo

Chuo Sogo Law Office, P.C.

12

The Fintech Landscape

1.1 Please describe the types of fintech businesses
that are active in your jurisdiction and the state of thedevelopment of the market, including in response to the
COVID-19 pandemic and ESG (Environmental, Social andGovernance) objectives. Are there any notable fintech
innovation trends of the past year within particularsub-sectors (e.g. payments, asset management, peerto-peer lending or investment, insurance and blockchain
applications)?

The fintech movement in Japan first started in the payment
sector – in particular, the enactment of the Payment Services
Act in 2010 made it possible for non-banks to provide payment
services. Currently, there are various types of payment services
available in Japan (both prepaid and postpaid). As a recent
trend, several companies have launched Buy Now, Pay Later(BNPL) services as one of their postpaid payment options for
consumers. In September 2021, PayPal purchased Paidy, Inc., a
BNPL service provider, for JPY 30 billion, which was reported
as the largest takeover of a Japanese startup at that moment.
Methods for payment have also diversified. Smartphones havebecome a popular instrument for contactless payments via theuse of NFC or QR codes. PayPay is the most popular QR code
payment service.
Personal financial management (PFM) services also attracted
public attention at the early stage of the fintech movement inJapan. This type of service allows users to collect their digitalfinancial data from several banks, credit cards and investment
accounts, and aggregate such data so that they may analyse theirpersonal financial situation. Money Forward, Inc. is a popular
service provider which started as such an account aggregation
service and went public in 2017. This type of service became
the driving force for the 2017 amendments to the Banking Act,with which service providers were required to be registered with
the Japanese Financial Services Agency ( JFSA) in order to havean API connection with banks.
Several types of crowdfunding services are available in Japan,
including donation-based crowdfunding, purchase-based (rewardbased) crowdfunding and investment-based crowdfunding.
Investment-based crowdfunding services became widely available due to the 2014 amendment of the Financial Instruments andFintech 2023

153

Shun Komiya

Exchange Act. Under the Act, when a service provider intends
to operate an investment-based crowdfunding platform, it isrequired to be registered as a Type II Financial Instruments Business engaging in electronic public offering services.
Peer-to-peer lending services in Japan are structured by the
combination of debt and equity. Lenders provide equity investments (Tokumei Kumiai Shusshi) in a service provider, while suchprovider makes loans to borrowers. After 2017, many peer-topeer service providers were subject to administrative orders in
relation to serious false disclosures/fraudulent conduct. Someregulatory enhancement/improvement for peer-to-peer lending
services will be put in place in the near future.
The 2016 amendment of the Payment Services Act introduced
the regulation for crypto-asset exchange business providers.
The Japanese regulator had previously taken a strict approachagainst crypto-related business. In 2022, although Web3 becamea buzzword and positive views regarding crypto spread, withthe failure of FTX, the general public still perceive crypto withuncertainty.
1.2 Are there any types of fintech business that are atpresent prohibited or restricted in your jurisdiction (forexample cryptocurrency-based businesses)?

No, there are not.

22

Funding For Fintech

2.1 Broadly, what types of funding are available for new
and growing businesses in your jurisdiction (coveringboth equity and debt)?

There are various types of funding schemes available for startups
in Japan. The following are examples of financing methods for
new and growing businesses:
1.
EquityInvestments by ordinary shares are the simplest way to acquire
equity investments. For startup investments, preferred sharestructure is also commonly used, which is the combination ofseveral rights for shareholders such as with/without voting
rights, preference in dividends and residual assets.

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Japan

2.

Recently, the “J-KISS” type of convertible equity has gained
popularity as a quick method for financing without the needfor valuation at the issuance of equity. Convertible bonds
with share acquisitions rights can be used by venture capitalfunds for investment in startups that prefer to avoid dilution.
Debt
Generally, banks provide corporate loans to startups
and receive a guarantee from the Credit Guarantee
Corporations (CGCs) in return. CGCs are public institutions that support small and medium enterprises (SMEs)
by serving as public guarantors to make it easier for themto borrow funds. In this regard, CGCs provide guarantees
for startups to borrow money (up to JPY 35 million) frombanks without any mortgages and guarantees.
Japan Finance Corporation, a public corporation wholly
owned by the Japanese government, lends money (up to
JPY 30 million) to startups without any mortgages orguarantees.
2.2 Are there any special incentive schemes forinvestment in tech/fintech businesses, or in small/medium-sized businesses more generally, in yourjurisdiction, e.g. tax incentive schemes for enterpriseinvestment or venture capital investment?

The angel tax credit programme is available for venture
investment. This programme is applicable to individual investors making investments in certain startups. Investors may
receive tax credit for a certain amount. In addition, investors
may deduct capital loss incurred through such venture investments from their capital gains for three years in total.
2.3 In brief, what conditions need to be satisfied for abusiness to IPO in your jurisdiction?

In 2022, the Tokyo Stock Exchange (TSE) restructured themarkets into three segments, i.e., “Prime Market”, “Standard
Market” and “Growth Market”.
1.
The Prime Market is for companies “which have appropriate levels of market capitalisation (liquidity) to be investment instruments for many institutional investors, keep ahigher quality of corporate governance, and commit tosustainable growth and improvement of medium- to longterm corporate value, putting constructive dialogue withinvestors at the center”.
2. The Standard Market is for companies “which have appropriate levels of market capitalisation (liquidity) to beinvestment instruments in the open market, keep the basic
level of corporate governance expected of listed companies, and commit to sustainable growth and improvementof medium- to long-term corporate value”.
3.
The Growth Market is for companies “which have acertain level of market value by disclosing business plans
for realising high growth potential and their progress
towards these appropriately and in a timely manner, but at
the same time pose a relatively high investment risk fromthe perspective of business track record”.
Listing requirements for the Growth Market are as follows:1.
Business Plan
a. A reasonable business plan is in place.
b. The principle underwriter submits its basis for its
opinion on the company’s high growth potential.
c. Appropriate disclosure on business plans and mattersrelated to high growth potential (business model,
market size, source of its competitive advantages, andbusiness risk).

2.

Liquidity
a. At least 150 shareholders.
b. At least 1,000 units of tradable shares.
c. At least JPY 0.5 billion market capital of tradable
shares.
Governancea. A tradable share ratio of at least 25%.

3.

2.4 Have there been any notable exits (sale of businessor IPO) by the founders of fintech businesses in yourjurisdiction?

The recent notable exits of founders of fintech companies inJapan are listed below:
1.
On December 22, 2021, Finatext Holdings Inc., an enterprise system provider for insurance companies and security
brokerages, listed on the TSE Mothers market (currently
the Growth Market).
2. On December 15, 2021, Net Protections Holdings Inc., a
BNPL service provider, listed on the first section of theTSE (Prime Market).
3.
On September 7, 2021, it was announced that Paidy Inc.,a BNPL service provider, would be acquired by PayPal
Holdings, Inc. for JPY 30 billion.
4.
On July 13, 2021, it was announced that pring Inc., apayment service provider, would be acquired by Google.

32

Fintech Regulation

3.1 Please briefly describe the regulatory framework(s)for fintech businesses operating in your jurisdiction, andthe type of fintech activities that are regulated.

As fintech can involve a wide variety of businesses, the financial regulations that may apply depends on the specific details ofeach business. Depending on the services provided by the business, registration or notification may be required under financial regulations. The main financial regulations are listed below.
A business operator who intends to start a remittance businessmust pay attention to regulations under the Payment Services
Act. Business operators other than banks must be registered or
licensed as a funds transfer service provider under the Payment
Services Act in order to carry out exchange transactions. Underthe revised Payment Services Act, which came into effect in May
2021, the funds transfer service is divided into three categories:
Type 1 Funds Transfer Service; Type 2 Funds Transfer Service;
and Type 3 Funds Transfer Service.
Type 1 funds transfer service providers can handle high-value
remittances of JPY 1 million or more, but they must obtain astricter licence than registration in order to start this business.
In addition, the Payment Services Act prohibits Type 1 funds
transfer service providers from accepting funds without specificremittance instructions regarding the amount and date of remittance, and from accepting funds beyond the period required forthe funds transfer. Type 2 fund transfer service providers canhandle remittances of JPY 1 million or less, but must obtainregistration. The Payment Services Act stipulates that Type 2
fund transfer service providers are obligated to deposit in trust
an amount equivalent to the accumulated funds, and to pay out
funds unrelated to remittance when the deposited funds exceed
JPY 1 million. Type 3 fund transfer service providers can handle
remittances of JPY 50,000 or less, but must obtain registration.
Type 3 fund transfer service providers are permitted to manage
funds entrusted by users in deposits and savings separately fromtheir own funds, unlike Type 2 fund transfer service providers,Fintech 2023

Chuo Sogo Law Office, P.C.

however Type 3 fund transfer service providers are obligatedto undergo an external audit by a certified public accountant or
an auditing firm if they choose to manage their funds throughdeposits and savings.
A business operator who intends to start a business related toprepaid electronic money/points is required to register or make a
notification under the Payment Services Act if the business intends
to issue “prepaid payment instruments”. There are two types ofprepaid payment instruments: “prepaid payment instrumentsfor one’s own business”; and “prepaid payment instruments fora third-party business”. “Prepaid payment instruments for one’s
own business” are those that can be used only when purchasing
goods or services from the issuer itself. Issuers of “prepaid
payment instruments for one’s own business” must notify the
Local Finance Bureau if the total unused balance exceeds JPY 10
million as of March 31 or September 30 in any given year (either ofthese two dates, the so-called “Base Date”). The notification must
be made within two months from the Base Date. On the other
hand, “prepaid payment instruments for a third-party business”
are prepaid payment instruments other than “prepaid payment
instruments for one’s own business”, and the issuer is required toregister in advance with the Local Finance Bureau.
BNPL refers to a service that allows consumers to pay forthe goods they purchase at a future date. In Japan, there is no
direct regulation of BNPL; however, businesses utilising BNPL
financing may be subject to the Installment Sales Act, which
regulates businesses operating instalment payment services.
Specifically, the Installment Sales Act stipulates that businesses
that operate instalment payment services for a period over twomonths must be registered as businesses involved in “Intermediation of Comprehensive Credit Purchases” or “Intermediationof Individual Credit Purchases”.
Businesses that want to provide a crowdfunding platform forsoliciting investments on the internet need to pay attention tofinancial regulations. There are three types of crowdfunding:donations; purchases; and investments. Of these, businesses
that engage in donation-type or purchase-type crowdfunding
do not need to report under the Financial Instruments andExchange Act. On the other hand, businesses that operate
investment-type crowdfunding are required to register or makea notification under the Financial Instruments and ExchangeAct, depending on the method of investment from investors.
There are various types of investment-related robo-advisors,
and whether registration under the Financial Instruments andExchange Act is required depends on the specific content of
the services provided. For example, a business operator thatprovides investment advice to investment management companies must be registered as an investment advisory/agency business because it advises on what investment decisions to makebased on the analysis of the value of securities or the value offinancial products. On the other hand, a business operator
that provides asset management services to general investors
must be registered as an investment management business inorder to place orders for transactions with securities companies. Furthermore, when providing a fully automated service
to general investors, the business operator is also required toregister as a Type I Financial Instruments Business.
There are various types of insurtech, and whether a licenceor registration under the Insurance Business Act is required
depends on the specific content of the services provided. Specifically, if the business to be conducted falls under the categoryof an “insurance business”, the business operator must obtain alicence or registration under the Insurance Business Act. Under
the Insurance Business Law, the term “insurance business”
refers to insurance which, among other things, (a) was offered in

Fintech 2023

consideration of payment of insurance premiums, and (b) promised to make compensation for damages that might occur due tocertain accidents. Furthermore, a business operator of a business involved in “insurance solicitation” must also be registered.
The Insurance Business Law defines “insurance solicitation” as“acting as an agent or intermediary for the conclusion of insurance contracts”.
3.2 Is there any regulation in your jurisdiction
specifically directed at cryptocurrencies or
cryptoassets?

A business operator that operates a crypto-asset exchange
business must be registered as a crypto-asset exchange service
provider under the Payment Services Act. A crypto-asset
exchange service entails (1) buying and selling crypto assets or
exchanging them for other crypto assets, (2) acting as intermediary, brokerage or agency for such activities, (3) managing ofusers’ money in relation to those activities, and (4) managing
crypto assets for others.
Even after registration, crypto-asset exchanges are subject
to various regulations aimed at user protection and establishing anti-money laundering (AML) measures. For example,
a crypto-asset exchange service provider is obligated to explain
to users that crypto assets are not based on legal tender andthat the value may fall below the purchase price. In addition,
crypto-asset exchange service providers must manage users’
assets separately, and are obligated to undergo external audits
by certified public accountants or audit firms. In addition, withrespect to AML measures, crypto-asset exchanges are obligedto (a) confirm the time of each transaction, (b) create and store
records, and (c) report suspicious transactions to the authorities
under the Act on Prevention of Transfer of Criminal Proceeds.
3.3 Are financial regulators and policy-makers inyour jurisdiction receptive to fintech innovation andtechnology-driven new entrants to regulated financial
services markets, and if so how is this manifested? Are
there any regulatory ‘sandbox’ options for fintechs inyour jurisdiction?

The JFSA has adopted a positive attitude toward fintech
trends. In fact, the JFSA has established the Fintech Support
Desk tasked with providing a streamlined process for fintech
businesses.
Furthermore, in 2018, the Japanese government created aregulatory sandbox system to encourage business activities using
new technologies and business models. This system enables
rapid demonstration by creating an environment in which newtechnologies can be demonstrated without being subject to theapplication of existing regulations.
3.4 What, if any, regulatory hurdles must fintech
businesses (or financial services businesses offering
fintech products and services) which are establishedoutside your jurisdiction overcome in order to accessnew customers in your jurisdiction?

Foreign fintech companies, if based in Japan, are subject to thesame licensing or registration requirements that apply to Japanese companies. And even if they are only based overseas,
foreign fintech companies that serve Japanese customers arelikely to be considered to have activities in Japan.

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42 Other Regulatory Regimes / Non-Financial Regulation

4.5 Please describe any AML and other financial crime
requirements that may apply to fintech businesses inyour jurisdiction.

4.1 Does your jurisdiction regulate the collection/use/transmission of personal data, and if yes, what is thelegal basis for such regulation and how does this apply
to fintech businesses operating in your jurisdiction?

“Specified business operators” under the Act on Preventionof Transfer of Criminal Proceeds (e.g. insurance companies,
financial instruments business operators, fund transfer service
providers, and crypto-asset exchange service providers) mustcomply, among other things, with the requirements to (1) verify
at the time of transaction, (2) create and record transactions,(3) report suspicious transactions, and (4) establish a system tocomply with these obligations.
In addition, “specified business operators” must also comply
with AML/CFT measures described in the “Guidelines for AntiMoney Laundering and Combating the Financing of Terrorism”
formulated by the JFSA.

Yes; in Japan, the Act on the Protection of Personal Information
regulates the collection/use/transmission of personal data. All
businesses that handle one or more types of personal information are subject to the Act on the Protection of Personal Information. Consequently, fintech businesses that handle personal
information are subject to this law.
4.2 Do your data privacy laws apply to organisations
established outside of your jurisdiction? Do your data
privacy laws restrict international transfers of data?

The Act on the Protection of Personal Information applies tobusiness operators in a foreign country that acquire personal
information while providing products or services to persons inJapan. However, business operators located in a foreign country
who are subject to the Act on the Protection of Personal Information are exempted from the application of some of its provisions, including, for example, the obligation to confirm andrecord when receiving personal data from a third party.
Before a company may provide personal data to a third party
in a foreign country, it must, as a general rule, obtain the consent
of the person to the effect that the provision to the third party
in a foreign country is permitted. However, in certain cases,
such as when the third party to whom the information is to beprovided is located in a country that has received an adequacy
decision from Japan, or when the third party has established acertain system, said consent is not necessary.
4.3 Please briefly describe the sanctions that apply for
failing to comply with your data privacy laws.

If a business operator handling personal information violates
the Personal Information Protection Law, the Personal Information Protection Commission can collect reports, conduct
on-site inspections, give guidance and advice, and issue recommendations and orders to the business operator.
Business operators will be subject to criminal penalties if they
do not respond to the Commission’s request for report collection or on-site inspection, make a false report in response to therequest for report collection, or violate the Commission’s orders.
4.4 Does your jurisdiction have cyber security laws
or regulations that may apply to fintech businesses
operating in your jurisdiction?

In November 2014, the government enacted the Basic Act on
Cybersecurity, a law that provides a basic framework for cybersecurity. Under this law, the Japanese government must takesteps to implement cybersecurity policies, including legislative,
fiscal and tax measures.
The Ministry of Internal Affairs and Communications
publishes laws related to cybersecurity on its website; forexample, it has published the Act on Prohibition of Unauthorized Computer Access and the Act on Regulation of Transmission of Specified Electronic Mail.

4.6 Are there any other regulatory regimes that may
apply to fintech businesses operating in your jurisdiction(for example, AI)?

There are no other pieces of legislation in Japan that apply
specifically to the fintech sector.

52

Accessing Talent

5.1 In broad terms, what is the legal framework aroundthe hiring and dismissal of staff in your jurisdiction?
Are there any particularly onerous requirementsor restrictions that are frequently encountered bybusinesses?

In Japan, there are various types of work, including full-time,permanent employment, fixed-term employment, dispatch
work, part-time fixed-term employment, part-time permanent
employment, and outsourcing.
Dismissals are generally difficult for an employer in Japan. A
dismissal is invalid as an “abuse of rights” if there is no objectively reasonable cause, or the dismissal is not reasonable undersocially accepted conventions (Article 16 of the Labour ContractAct). Types of dismissal are broadly divided into three categories: (1) reorganisation dismissal, (2) disciplinary dismissal,and (3) ordinary dismissal, and the framework for judgments
regarding the validity of dismissal differs for each type. Also,
discrimination on the basis of nationality, creed, social status orgender is prohibited.
In addition, there are various restrictions when an employer
refuses to renew a fixed-term employment. For example, if
a fixed-term employment is regarded as an indefinite-term
employment virtually, or if there is a reasonable expectation ofcontinued employment, the employer cannot refuse to renew
the contract unless there is an objective rational reason and it isreasonable under socially accepted conventions. Furthermore,
if an employment period has been for more than five years intotal as a result of renewal(s), the contract may be changed to
an indefinite-term employment contract upon application by theemployee at the time of the next contract renewal.
5.2 What, if any, mandatory employment benefits must
be provided to staff?

In Japan, companies are required to provide the following benefits to employees: health insurance; employee pension insurance; unemployment insurance; workers’ accident compensation
Fintech 2023

Chuo Sogo Law Office, P.C.

insurance; long-term care insurance; and contributions for children and childcare. The ratio of company and employee contributions is different depending on the types of benefits, andthe employee’s contribution is deducted from the company’s
monthly salary and paid to the government by the company.
The approximate cost to the company for the required benefits
is 14–18% of the salary paid to an employee.
In addition, under the Labour Standards Act, workers who
have been continuously employed for six months or more andhave worked at least 80% of all working days are entitled to a
maximum of 20 days of annual paid leave depending on thenumber of years of continuous employment.
5.3 What, if any, hurdles must businesses overcome
to bring employees from outside your jurisdiction into
your jurisdiction? Is there a special route for obtaining
permission for individuals who wish to work for fintech
businesses?

Foreign nationals are required to have a status of residence towork in Japan.
The status of residence other than Permanent Resident, Spouseor Child of Japanese National, Spouse or Child of Permanent
Resident, and Long-Term Resident is granted based on the natureof the work a foreigner intends to perform in Japan. This status is
granted to persons with advanced knowledge and skills, including
highly skilled professionals, business managers, persons providing
legal/accounting services, medical services, researchers, instructors, engineers/specialists in humanities/international services,
intra-company transferees, nursing care providers, entertainers,
skilled labourers, specified skilled workers, and technical interntrainees. Notably, various preferential measures, such as relaxed
requirements for permanent residence permits, are granted tohighly skilled professionals. If a foreigner meets the requirements of the “Point Calculation Chart” published by the Immigration Bureau and reaches a total of 70 points or more, they will
be recognised as highly skilled professionals.
There is no special route for obtaining permission for individuals who wish to work for fintech businesses. However, under
the policy of strategically attracting financial human resources toJapan, the July 2021 amendment to the Point Calculation Chartprovides that, in the calculation of the point system for determining eligibility for the highly skilled professional, foreigners
who engage in Type II Financial Instruments Business, Investment
Advisory and Agency Business, or Investment Management Business will be given 10 points in addition to other points based onother factors such as work history, education and annual income.

62

Technology

6.1 Please briefly describe how innovations andinventions are protected in your jurisdiction.

In Japan, the laws dealing with intellectual property (IP) protect
innovations and inventions. For example, under the Patent Act,
inventions are protected for 20 years from the date of filing.
The Copyright Act protects literary, academic, artistic, musicaland computer program creations without filing, and the term ofprotection begins at the time of creation and lasts for 70 years
after the creator’s death. The Unfair Competition Prevention
Act protects trade secrets, such as know-how and customer lists,and regulates acts of unfair competition (such as theft).
In addition, business entities can protect their own confidential information related to innovations and inventions
by agreeing with their business partners on the handling ofFintech 2023

information in non-disclosure agreements, joint development
agreements, and development consignment agreements.
6.2 Please briefly describe how ownership of IP
operates in your jurisdiction.

As a general rule, the right to obtain a patent is vested in theinventor, i.e., an individual such as an employee. However,
the right to obtain a patent for an employee invention can be
attributed to a company from the beginning by stipulating inan employment agreement or employment regulations that theemployer has the right to obtain a patent. However, the employee
who is the inventor can seek to receive from the company areasonable profit on the employee’s invention as remuneration.
On the other hand, copyrights and moral rights, as a generalrule, belong to the individual who created the work. Exceptionally, however, copyrights will belong to the employer if (a) the
work is created based on the employer’s initiative, (b) the workis created by the employees in the course of their duties, (c) the
work is published under the name of the employer (this requirement does not need to be met for the copyright of a computer
program), and (d) neither an employment agreement nor employment regulations provide otherwise. Regardless of the exceptions, the usual practice is to stipulate in an employment agreement or employment regulations that the copyright is transferredfrom the employee to the employer. In addition, moral rights,
i.e., the right to make a work public, the right to attribution, andthe right to integrity, are separate from copyrights and cannot betransferred. Therefore, it is usual for companies to agree with
employees that the employees will not exercise their moral rights.
6.3 In order to protect or enforce IP rights in yourjurisdiction, do you need to own local/national rights or
are you able to enforce other rights (for example, do any
treaties or multi-jurisdictional rights apply)?

Basically, the territoriality principle applies in Japan. Therefore,
in order to exercise patent or trademark rights in Japan, it is necessary to file an application and obtain patent or trademark rights inJapan. Under the Paris Convention for the Protection of Industrial
Property, those who filed an application for a patent in a member
country can claim a right of priority for the patent in Japan if they
file an application in Japan within 12 months. As a result, thefiling date in the member country can be deemed as the filing datein Japan. Under the Patent Cooperation Treaty, filing an international application in a member country has the same effect as filingan application in any other member country, including Japan.
Thereafter, if the company completes domestic application procedure in Japan within 30 months and the Japanese Patent Office
grant a patent, they can exercise rights in Japan based on the patent.
On the other hand, with regard to copyrights, based on treaties such as the Berne Convention, the Universal Copyright
Convention, and the WIPO Copyright Treaty, even works fromforeign member countries are protected in Japan under the
Copyright Act.
6.4 How do you exploit/monetise IP in your jurisdiction
and are there any particular rules or restrictions
regarding such exploitation/monetisation?

IP can be exploited or monetised in Japan by means of assignment, licensing or grant of security.
■
Assignment: The transfer of patent rights does not takeeffect unless the transfer is registered. On the other hand,

157

158

Japan

■

■

it is not necessary for the transfer of copyrights to be inwriting. However, in practice, the copyright transfer agreement is always made in writing as it is necessary to specifically list the transfer of rights as stipulated in Articles 27 and
28 of the Copyright Act. Also, a copyright transfer cannot
be asserted against a third party without registration, so
important copyright transfers are likely to be registered.
Licences: In principle, there is no legal requirement thatlicensing of IP rights be made in writing. However, licensing
is usually done by entering into a licensing agreement. In
addition, when granting an “exclusive licence” to a patent(i.e., a right that allows only the licensee to use the patented
invention), the licensee is required to sign a licensing agreement, and the licence must be registered at the Japanese
Patent Office.
Security interests: A grant of a security interest in patentrights does not take effect unless it is registered. Regarding
copyrights, in practice, the creation of a security interest is
made in writing. In addition, registration is required forthe perfection of the security interest.

Fintech 2023

Chuo Sogo Law Office, P.C.

Koji Kanazawa has advised various financial institutions/fintech startups in all aspects of their operations, with a focus on financial regulatory matters. He has experience working at the JFSA and the Japanese government, and has worked on compliance/risk management
issues of financial institutions/fintech startups, including AML/CFT, countermeasures against anti-social forces, and personal data protection. He has represented both Japanese and overseas clients, including banks, insurance companies, asset management companies, investment funds, credit card companies, leasing companies and non-bank finance companies. Such representation extends to complex financial
regulatory matters (including issues relating to the Banking Act, the Insurance Business Act, the Financial Instruments and Exchange Act,
the Money Lending Control Act, the Investment Act and the Asset Securitization Act), structured finance and litigations arising from the salesof financial instruments.
Chuo Sogo Law Office, P.C.
Hibiya Kokusai Building, 18th floor
2-2-3 Uchisaiwaicho, Chiyoda-ku, Tokyo 100-0011
Japan

Tel:
Email:
URL:+81 3 3539 1877
kanazawa_k@clo.gr.jp
www.clo.jp

Katsuya Hongyo represents Japanese and overseas clients, including banks, insurance companies, asset management companies, andfintech startups. His practice focuses on financial regulation, finance, M&As, compliance/risk management, and litigation, drawing in largepart on his experience working as a visiting attorney at Kirkland & Ellis LLP in Chicago and as a seconded attorney at the JFSA. During his
secondment, he revised financial regulations to enable banks to invest in trading companies that expand local SMEs’ sales channels andclarify requirements for banks to deal with crypto assets or operate information banking businesses. He also partly drafted the Act on Special
Provisions of the Antimonopoly Act, making it easier for banks to integrate their business. He also responded to inquiries from banks for aninterpretation of banking regulations.
Chuo Sogo Law Office, P.C.
Hibiya Kokusai Building, 18th floor
2-2-3 Uchisaiwaicho, Chiyoda-ku, Tokyo 100-0011
Japan

Tel:
Email:
URL:+81 3 3539 1877
hongyo_k@clo.gr.jp
www.clo.jp

Shun Komiya represents Japanese and overseas clients, including banks, insurance companies and fintech companies. His practice focuses
on financial regulation, finance, M&As, compliance/risk management, and litigation, drawing on his experience on secondment to the JFSA.
During his secondment, he was involved in work related to AML and CFT, including responding to the FATF’s Fourth Mutual Examination withJapan, as well as the revision of the Banking Law. He also handled inquiries from banks on the interpretation of banking regulations.
Chuo Sogo Law Office, P.C.
Hibiya Kokusai Building, 18th floor
2-2-3 Uchisaiwaicho, Chiyoda-ku, Tokyo 100-0011
Japan

Chuo Sogo Law Office is a full-service law firm comprising upwards of 60
lawyers in offices located in the financial and business centres of Tokyo,
Osaka and Kyoto. For over 50 years, the firm has been assisting international and domestic clients in an efficient and cost-effective manner.
The firm’s lawyers graduated from top Japanese and US law schools. Asa member of a leading network of some 100 law firms worldwide, Chuo
Sogo serves clients virtually anywhere in the world. The firm’s main areasof practice are commercial law, finance, compliance/risk management,
M&As, corporate reorganisations, insurance & reinsurance, labour law,transportation, IP, securitisation matters, bankruptcy/business rehabilitation, real estate, international business, tax, administrative law, organised
crime countermeasures, and litigation & dispute resolution. Notably, Chuo

Fintech 2023

Tel:
Email:
URL:+81 3 3539 1877
komiya_s@clo.gr.jp
www.clo.jp

Sogo boasts a number of attorneys who, at some point in their career, wereseconded to the JFSA, and can provide practical advice based on theircutting-edge knowledge of Japanese financial regulations.
www.clo.jp159

Current titles in the ICLG series
Alternative Investment Funds

Franchise

Anti-Money Laundering

Gambling

Aviation Finance & Leasing

Insurance & Reinsurance

Aviation Law

International Arbitration

Business Crime

Investor-State Arbitration

Cartels & Leniency

Lending & Secured FinanceClass & Group Actions

Litigation & Dispute Resolution

Competition Litigation

Merger Control

Construction & Engineering Law

Mergers & Acquisitions

Consumer Protection

Mining Law

Copyright

Oil & Gas Regulation

Corporate Governance

Patents

Corporate Immigration

Pharmaceutical Advertising

Corporate Investigations

Private Client

Corporate Tax

Private Equity

Cybersecurity

Product Liability

Data Protection

Project FinanceDerivatives

Public Investment Funds

Designs

Public Procurement

Digital Business

Real Estate

Digital HealthRenewable Energy

Drug & Medical Device Litigation

Restructuring & Insolvency

Employment & Labour Law

Sanctions

Enforcement of Foreign Judgments

Securitisation

Environment & Climate Change Law

Shipping Law

Environmental, Social & Governance Law

Technology Sourcing

Family Law

Telecoms, Media & Internet

FintechTrade Marks

Foreign Direct Investment Regimes

Vertical Agreements and Dominant Firms

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