Fintech
Contributing editors
Angus McLean and Penny Miller

2019© Law Business Research 2018

Fintech 2019
Contributing editors
Angus McLean and Penny Miller
Simmons & Simmons

Reproduced with permission from Law Business Research Ltd
This article was first published in September 2018
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CONTENTS
Introduction5

Netherlands90

Angus McLean and Penny Miller
Simmons & SimmonsJeroen Bos, Aron Berket and Marline Hillen
Simmons & Simmons

Australia7

Norway98

Peter Reeves
Gilbert + Tobin

Espen Tøndel, Morten Wilhelm Winther, Sunniva Kinsella,
Marit Stubø, Cecilia Orheim, Erik Martinius Klevmo
and Christian Svensen
Advokatfirmaet Simonsen Vogt Wiig AS

Belgium16
Vincent Verkooijen and Jérémie Doornaert
Simmons & Simmons LLP

Russia105

China24
Jingyuan Shi
Simmons & Simmons

Anastasia Didenko, Anton Didenko, Valeria Ivasikh
and Svetlana London
CIS London & Partners LLP
Singapore112

Czech Republic

30

Loebl Zbyněk, Ditrych Jan, Linhartová Klára, Frolík Martin
and Kalíšek Jindřich
PRK Partners s.r.o., Attorneys at Law

Damian Adams, Jason Valoti, Gurjoth Kaur, Zixiang Sun and
Benedict Tan
Simmons & Simmons JWS Pte Ltd
Spain120

Germany35
Felix Biedermann, Lennart Dahmen, Carolin Glänzel,
Christopher Götz, Martin Gramsch, Sascha Kuhn,
Janine Manke, Khanh Dang Ngo and Elmar Weinand
Simmons & Simmons LLP

Alfredo de Lorenzo, Ignacio González, Carlos Jiménez deLaiglesia, Álvaro Muñoz, Juan Sosa and María Tomillo
Simmons & Simmons
Sweden128

Hong Kong

43

Ian Wood
Simmons & Simmons

Emma Stuart-Beck, Caroline Krassén, Lave Nilsson, Henrik
Schön, Nicklas Thorgerzon and Maria Schultzberg
Advokatfirman Vinge
Switzerland135

India50
Stephen Mathias and Anuj Kaila
Kochhar & Co

Michael Isler and Thomas Müller
Walder Wyss Ltd
Taiwan143

Indonesia57
Abadi Abi Tisnadisastra, Yosef Broztito andRaja S G D Notonegoro
AKSET Law

Abe T S Sung and Eddie Hsiung
Lee and Li, Attorneys-at-Law
150

United Arab Emirates

Japan64
Ryuichi Nozaki, Yuri Suzuki, Hiroyuki Sanbe, Ryosuke Oue,
Takafumi Ochiai and Kenichi Tanizaki
Atsumi & Sakai
Korea73
Jung Min Lee, Joon Young Kim and Kwang Sun Ko
Kim & Chang

Raza Rizvi, Muneer Khan and Samir Safar-Aly
Simmons & Simmons
United Kingdom

159

Angus McLean, Penny Miller, George Morris, Darren Oswick,Peter Broadhurst, Kate Cofman-Nicoresti and Ben Player
Simmons & Simmons
United States

Malta81

171

Matthew Kluchenek and Samuel Kramer
Baker McKenzie

Olga Finkel, Ruth Galea, Gaby Zammit and Erika Micallef
WH Partners

2

Getting the Deal Through – Fintech 2019
© Law Business Research 2018

PREFACE

Preface
Fintech 2019
Third edition
Getting the Deal Through is delighted to publish the third editionof Fintech, which is available in print, as an e-book and online atwww.gettingthedealthrough.com.
Getting the Deal Through provides international expert analysis in
key areas of law, practice and regulation for corporate counsel, crossborder legal practitioners, and company directors and officers.
Throughout this edition, and following the unique Getting the Deal
Through format, the same key questions are answered by leading
practitioners in each of the jurisdictions featured.
Getting the Deal Through titles are published annually in print.
Please ensure you are referring to the latest edition or to the online
version at www.gettingthedealthrough.com.
Every effort has been made to cover all matters of concern toreaders. However, specific legal advice should always be sought fromexperienced local advisers.
Getting the Deal Through gratefully acknowledges the efforts of all
the contributors to this volume, who were chosen for their recognised
expertise. We also extend special thanks to the contributing editors,
Angus McLean and Penny Miller of Simmons & Simmons, for theircontinued assistance with this volume.

LondonAugust 2018www.gettingthedealthrough.com 3© Law Business Research 2018

JAPAN

Atsumi & Sakai

Japan
Ryuichi Nozaki, Yuri Suzuki, Hiroyuki Sanbe, Ryosuke Oue, Takafumi Ochiai and Kenichi
TanizakiAtsumi & Sakai
Financial services regulation
1

Which activities trigger a licensing requirement in yourjurisdiction?

•

Engaging in the arrangement of investment deals or making
arrangements with a view to transactions in investments in eithercase for an investment fund that invests mainly in financial instruments, comprises an ‘investment management business’ under
the Financial Instruments and Exchange Act (FIEA), and registration is required.
Engaging in the management of an investment fund that invests
mainly in financial instruments also comprises investment management business under the FIEA regardless of whether suchmanagement is made as principal or agent, and registration isrequired.
Giving advice on investments under a contract for a fee comprises‘investment advisory business’ under the FIEA, and registration isrequired.
Engaging in ‘banking business’ requires a banking licence underthe Banking Act. ‘Banking business’ is defined as the acceptanceof deposits or instalment savings, loan of funds (when conducted
together with acceptance of deposits or instalment savings) or
funds transfer service. Loan of funds, when not conducted withacceptance of deposits or instalment savings, is generally regarded
as a ‘money-lending business’, which requires registration as amoney lender under the Money Lending Business Act.
If a factoring transaction is with recourse, such transaction can bedeemed as a lending, and thus engaging in such transaction may
require registration as a money lender under the Money Lending
Business Act.
Invoice discounting does not trigger a licensing requirement.
Secondary market loan trading does not trigger a licensing
requirement.
Acceptance of deposits is prohibited without a banking licence
under the Japanese Banking Act.
Some foreign exchange trading (such as foreign exchange margin trading transactions, non-deliverable forwards, forward rateagreements) comprises ‘over-the-counter transactions of derivatives’ under the FIEA and registration is required.
A bank may conduct funds transfer services with a banking
licence. If not a bank, a registration under the Payment Services
Act as a funds transfer service provider is needed before conducting payment services. Also, if the issuance of prepaid payment
instruments is conducted, then under the Payment Services Act,
registration is required (see question 25). If the payment service isprovided as a later payment using a credit card, then registration
under the Instalment Sales Act is required.

•

•
•

•

•
•
•
•

•

2

Is consumer lending regulated in your jurisdiction? Describe
the general regulatory regime.

A lender conducting a consumer lending business (excluding thebusiness of accepting deposits or instalment savings, which requires
a banking licence under the Banking Act) has to register as a money
lender under the Money Lending Business Act.
There is a limit on the total lending to any individual and a cap on
the interest rate chargeable. The total lending limit is one-third of theborrower’s annual income and the cap is 15 to 20 per cent per annum
depending on the amount of the loan. The money lender is required toappoint a chief of money-lending operations to each business office.
3

Are there restrictions on trading loans in the secondary
market in your jurisdiction?

If a money lender transfers loan claims, the transferee will be subject
to the same restrictions under the Money Lending Business Act that
apply to the original money lender and the transferor must notify theoperating transferee that those restrictions will also apply to the transferee. There is no such restriction for a bank under the Banking Act.
4

Describe the general regulatory regime for collective
investment schemes and whether fintech companies
providing alternative finance products or services would
generally fall within the scope of any such regime.

The FIEA requires those who engage in either the acceptance of applications for shares for subscription in collective investment schemes orinvestment management of assets collected through such subscription
or contribution, in principle, to register as a financial instruments business operator.
If a crowdfunding company raises funds for lending money to acompany seeking funds through a form of silent partnership, an invitation to invest in the silent partnership would, in principle, be a collective investment scheme and so the crowdfunding company would
need to be registered under the FIEA.
If an investor makes a direct investment in a silent partnershipestablished with respect to a company seeking funds and receives
a share in the silent partnership, dealing with the issuance of such ashare could also be characterised as a collective investment scheme,
subject to certain exceptions introduced in 2015.
Under such exceptions, a company that deals with a small fundraising on the internet may register as Type I Small Amount Electronic
Public Offering Business or Type II Small Amount Electronic Public
Offering Business, and, if registered, some requirements that apply toa financial instruments business operator will be mitigated.
5

Are managers of alternative investment funds regulated?

Managing funds as investments in assets such as real estate (excluding
rights in relation to negotiable securities and derivative transactions)
are not subject to the FIEA. As such, those activities are not regarded
as being a financial instruments business.
6

May regulated activities be passported into your jurisdiction?

Japan is a member of the Asia Region Funds Passport (ARFP). The
ARFP framework is intended to standardise mutual participation
conditions for APEC member countries and regions signatory to theMemorandum of Co-operation on the establishment and implementation of the ARFP (the ARFP MoC) that meet certain requirements andoffer funds (investment trusts and investment corporations) operated
in accordance with the ARFP MoC. This will promote clarity and efficiency of registration standards in ARFP fund exporter countries ( thehome country) and authorisation procedures in ARFP fund importer
countries (the host country).

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When importing funds into Japan based on the ARFP MoC, theapplication procedure should be as follows if authorisation as an ARFP
fund is made under the Financial Services Agency (FSA):• the applicant (operator of the fund being imported into Japan)
is required to establish an agent in Japan when exporting ARFPregistered funds from its home country. The agent shall submit to
the Agent Association Member (defined in the Rules Concerning
Foreign Securities Transactions (JSDA Rules) prescribed by theJapan Securities Dealers Association (JSDA)) copies of documentation certifying compliance with the ARFP rules issued by the homecountry and base documents for ‘the Statement of Notification of
Dealing in Foreign Investment Trust Securities’, certificates relating to the fulfilment of selection criteria, and any other documentation deemed necessary by the JSDA (collectively, ‘the Statementof Notification of Dealing in Foreign Investment Trust Securities,etc’). The Agent Association Member should submit the Statementof Notification of Dealing in Foreign Investment Trust Securities,
etc, to the JSDA after confirming the relevant fund satisfies theselection criteria;• the JSDA should review the Statement of Notification of Dealingin Foreign Investment Trust Securities, etc, against the selection
criteria of the foreign investment trust securities prescribed in the
JSDA Rules, and notify the Agent Association Member of the result.
The Agent Association Member receiving the result will inform theapplicant’s agent of the result;• the applicant’s agent will submit the Statement of Notification of
Dealing in Foreign Investment Trust Securities, etc, and copies of
documentation certifying compliance with ARFP rules issued by
the home country to the FSA. The FSA confirms conformity as an
ARFP fund based on the ARFP MoC, and notifies the agent of theresult; and• on receiving a notification from the FSA of the conformity with the
ARFP requirements, the agent shall notify the FSA under the Act on
Investment Trusts and Investment Corporations, either for foreign
investment trusts or for foreign investment corporations.
7

May fintech companies obtain a licence to provide financial
services in your jurisdiction without establishing a local
presence?

It will depend on the nature of the services the fintech company will
provide. Under the Banking Act, a foreign bank that wishes to engage
in banking in Japan must obtain a licence by specifying a single branch
office that will serve as its principal base for banking in Japan. To be registered as an electronic settlement agent (see question 15), foreign juridical entities must register a branch and a representative in Japan, andforeign individuals without an address in Japan must appoint an agent inJapan. Overseas money lenders cannot be registered under the Money
Lending Business Act without having a place of business in Japan.
Under the Payment Services Act, it is possible to register foreign funds
transfer service providers, issuers of prepaid payment instruments andvirtual currency exchange operators, if such foreign provider, issuer or
exchange operator has a business office in Japan. A foreign company
that wishes to establish what is defined under the FIEA as a ‘financial
instruments business’, such as a securities brokerage or investment
management business, is required to have a business office in Japan forregistration under the act, provided that, for registration of an investment advisory business, a business office in Japan is not required.
8

Describe any specific regulation of peer-to-peer ormarketplace lending in your jurisdiction.

A person who intends to engage in the business of lending money or acting as an intermediary for the lending or borrowing of money must be
registered under the Money Lending Business Act. To avoid an investor
being required to be registered as a money lender under the act, marketplace lending in Japan generally takes the form of a tokumei kumiai (TK)
partnership, under which a registered operator collects funds from TK
partnership investors, then advances the funds to enterprises as loans.
The operator then receives principal and interest payments from theenterprises and distributes the funds as dividends and return of capital
to investors. In this structure, the operator is required to be registeredboth as a money lender under the Money Lending Business Act (inorder to provide the loans), and as a financial services provider under
the FIEA in order to solicit TK partnership investors.

Usury law restricts the permitted interest rate to a maximum of
between 15 per cent and 20 per cent per annum depending on the loan
amount.
9

Describe any specific regulation of crowdfunding in yourjurisdiction.

Crowdfunding in Japan is categorised as donation-based crowdfunding, reward-based crowdfunding and investment-based crowdfunding. Investment-based crowdfunding is further categorised as
equity-based crowdfunding, fund-based crowdfunding and lendingbased crowdfunding. See question 8 for regulation specific to lendingbased crowdfunding.
Equity-based crowdfunding and fund-based crowdfunding are
regulated under the FIEA, which defines certain internet-based solicitations and such as ‘electronic solicitation handling services’. Different
rules apply to electronic solicitation handling services for certain nonlisted securities, etc, from those that apply to ordinary solicitation
handling services for securities. Special rules apply in particular whenthese electronic solicitation handling services are conducted entirely
via a website, right through to application for the purchase of securities,
referred to as ‘electronic purchase-type solicitation handling services’.
In order to encourage new market entrants, requirements for theregistration of electronic solicitation handling services handling theissuance of securities with less than ¥100 million in the issuance volume and with ¥500,000 or less in the investment amount per investor
are relaxed.
Reward-based crowdfunding is regulated by the Specified
Commercial Transactions Act, which, in particular, restricts advertising and gives consumers a cancellation right.
10 Describe any specific regulation of automated investment
advice in your jurisdiction.
Specific regulations addressing automated investment advice itself
have not yet been introduced. The required licences and permits forautomated investment advice depends on the respective services thatare provided. If the service provided is related to investment management, the issue is, in many cases, whether or not registration as a financial instruments business is required under the FIEA.
Here are some illustrative examples of different ways that automated investment advice can be regulated differently:• if the service is limited to providing advice relating to the value of
securities, such as stocks and mutual funds (including exchangetraded foreign ETFs), then it is regulated as an investment advisorybusiness;• if the service involves entrustment with discretion to make investment decisions and authority necessary to make investments onbehalf of clients by using a robo-adviser, then it is regulated as aninvestment management business; and• if a service includes sales and purchases of securities or intermediary, introducing brokerage or agency services for entrustment of
securities to be traded on the market as a business, then it is regulated as a Type I Financial Instruments Business.
As mentioned above, the requisite permits and licences depend on thenature of the services provided.
11 Describe any specific regulation of invoice trading in yourjurisdiction.
If an entity engages in invoice trading in Japan, there are some legal
and regulatory issues to note. If there is an agreement between a supplier and a buyer to prohibit the transfer of invoices, there is a risk thata funder cannot acquire invoices pursuant to the Civil Code. Further,
there is also a risk that a supplier will sell its invoices to another party
outside the trading platform in addition to a funder via the platform.
To ensure that the funder obtains the invoices, the debt transfer mustbe perfected by the buyer being notified of or approving the transfer
pursuant to the Civil Code, or it must be registered in the debt transfer registration system. The invoice-trading platform must not be
detrimental to a supplier that is a subcontractor which is protectedby the Act against Delay in Payment of Subcontract Proceeds, Etc to
Subcontractors.
There is some invoice-trading business recourse for a supplier if
there is no repayment from a buyer. If this is the case, the transaction

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Atsumi & Sakai

may be characterised as secured lending and thus the business would
be required to obtain a money-lending business licence under the
Money Lending Business Act.
12 Are payment services a regulated activity in your jurisdiction?
Payment services may fall within the scope of exchange transactions
and therefore fall within the definition of banking business and requirea banking licence under the Banking Act. Obtaining this licence is quite
onerous and it is unlikely that a fintech company would be eligible forone.
Other exchange transactions are not defined in the Banking Act,but according to a precedent set by a Supreme Court decision, ‘conducting an exchange transaction’ means accepting a request from acustomer to transfer funds using the mechanism of transferring funds
between parties at a distance without actually transporting cash, or
accepting and actually carrying out the request. If payment services,
something that many fintech businesses are involved in, fall into thisdefinition, the operator could be required to obtain a banking licenceor register under the Payment Services Act.
While the Banking Act regulates exchange transactions, thePayment Services Act allows non-banks registered thereunder toengage in exchange transactions in the course of their business even if
not permitted under the Banking Act, provided that the amount of eachexchange transaction is not greater than ¥1 million.
The Payment Services Act also regulates prepaid payment instruments which are issued in exchange for the receipt of consideration
corresponding to the amount recorded using electromagnetic means
which can be used for the purpose of paying consideration for the purchase or leasing of goods or the receipt of provision of services fromthe person designated by the issuer. Prepaid payment instruments are
sometimes used in peer-to-peer (P2P) payment platforms. The issuer
could require registration or notification subject to the conditions provided by the Payment Services Act.
Recent amendments to the Banking Act requires a business operator providing payment initiation services to be registered as an electronic settlement agent (see question 15).
13 Do fintech companies that wish to sell or market insurance
products in your jurisdiction need to be regulated?
Yes. In Japan, when a fintech company carries out any of the following, it must register as an insurance agent as such actions correspondto ‘insurance solicitation’ under the Insurance Business Act: (i) soliciting the conclusion of insurance contracts; (ii) providing explanations of
insurance products for the purpose of soliciting the conclusion of insurance contracts; and (iii) accepting applications for insurance contracts;or (iv) acting as an intermediate or agent for the conclusion of otherinsurance contracts.
Providing information on prospective customers to insurancecompanies and insurance agents without recommending or explaining insurance products, and the mere reprinting of information frominsurance companies and insurance agents where the service’s main
purpose is to provide product information, such as comparison sites,
do not in themselves constitute ‘insurance solicitation’; however, theseacts are ‘solicitation related acts’, and insurance companies and insurance agents who entrust such acts to other persons have an obligation
to manage and supervise those persons to ensure that they do not violate insurance offering regulations.
14 Are there any legal or regulatory rules in your jurisdiction
regarding the provision of credit references or credit
information services?
In general, while credit references of individuals are subject to the Act
on Protection of Personal Information, credit references of corporates
are subject to confidentiality obligations under financial services regulations and confidentiality agreements between financial institutions
and corporates.
In Japan, personal credit information agencies collect informationon the ability of persons to make credit repayments and provide suchinformation to financial institutions which are members of such agencies. Financial institutions using credit information services of suchagencies may not use information on the ability of individuals to meet
repayments (‘personal credit information’), which is part of the financial information provided by personal credit information agencies, forpurposes other than the investigation of the ability of fund users tomake repayments.
In addition, under the FSA guidelines, when financial institutions
provide personal information to personal credit information agencies,
they must state to their customers that they provide personal information to personal credit information agencies and obtain the consent
from the customers.
The FSA’s guidelines that regulate personal credit information
agencies require that they ensure that their member financial institutions appropriately obtain and record personal credit information via
such agencies, and that it is not used for purposes other than the investigation of the subject’s repayment ability. To that end, personal credit
information agencies are required to take measures such as screening
a financial institution’s qualifications at the time it applies for membership, monitoring of members, and the imposition of sanctions for the
improper use of personal credit information.
15 Are there any legal or regulatory rules in your jurisdiction thatoblige financial institutions to make customer or product data
available to third parties?
Yes. In order to encourage financial institutions to make customer data
available to third parties, recent amendments to the Banking Act cameinto force on 1 June 2018. Under the amendments, the FSA will develop
a registration system for electronic settlement agents providing payment initiation services and/or account information services, whichis expected to be simpler than the existing system applicable to funds
transfer service providers, to promote innovation and ensure user protection. In addition, the FSA is attempting to improve the current situation where it is extremely difficult for fintech companies using open
application programming interface (API) to share data or revenue withbanks due to restrictions on bank agency businesses. The FSA’s main
aim is to enhance the effectiveness of open API by encouraging banks
to develop their API systems and prohibiting discriminatory treatment
among service providers. Discussions on the subject within the FSA are
focused on the development of an open API-friendly environment inwhich, although fintech companies will still be subject to a registration
system, will require the reorganisation of existing regulations and thedevelopment of systems by participating financial institutions.
16 Does the regulator in your jurisdiction make any specificprovision to encourage the launch of new banks?
No.
17 Describe any specific rules relating to notification or consent
requirements if a regulated business changes control.
The conclusion will vary according to the applicable regulatory law;examples include:
In the case of a bank’s shareholders, a shareholder holding morethan 5 per cent but less than 20 per cent of the bank’s shares (which isreferred to as a ‘Major Holder of Voting Rights in a Bank’) is required
to notify to the FSA (i) when it acquires more shares; or (ii) when there
is a change in its percentage holding. Moreover, a shareholder who
will have actual power to influence the bank’s management (such as
an individual or a group of shareholders intending to hold 20 per centor more of the shares) (referred to as a ‘Bank’s Major Shareholder’),must obtain authorisation from the FSA to acquire such a shareholding.
Further, the FSA has, in certain circumstances, the authority to requestthat a shareholder who holds 50 per cent or more of the voting rights ina bank (referred to as a ‘Bank’s Controlling Shareholder’) submits an
improvement plan for ensuring soundness in the bank’s management;
order that the Bank’s Controlling Shareholder changes an improvement
plan that has been submitted; or issues orders with respect to measuresnecessary from a supervisory perspective.
Similar major shareholder regulations are imposed on Type I
Financial Instruments Business and investment management business.
Under these regulations, a person that has become a major shareholder(in principle, person holding 20 per cent or more of the voting rights)
of a Type I Financial Instruments Business and/or investment management business, is required to submit a notification of holdings in voting
rights to the director-general of the relevant local finance bureau, whichstates, among other things, (i) the percentage of voting rights held; and(ii) the purposes for holding such shares, etc, immediately after becoming a major shareholder. Similar notification is also required when a66

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JAPAN

major shareholder ceases to be a major shareholder. This regulationis less onerous than the major shareholder regulations applicable tobanks.
Virtual currency exchange services providers are required to submit their shareholder registry to the Director-General of the relevant
local finance bureau at the time of applying for registration, and to
update the shareholder registry thereafter on a change in its major
shareholder(s) (ie, in this case, a person holding 10 per cent or more of
the voting rights).
18 Does the regulator in your jurisdiction make any specificprovision for fintech services and companies? If so, what
benefits do those provisions offer?
In December 2015, the FSA set up a ‘fintech support desk’ to provide
a unified response to handle enquiries from the private sector and to
exchange information regarding the fintech industry. This desk fields
enquiries from a wide range of businesses operating or considering various fintech-related innovations, and specific business-related mattersregarding the finance aspects of these plans. It also actively seeks public
opinion, requests and proposals, and actively shares general information and opinions in relation to fintech innovation.
In September 2017, the FSA established the FinTech PoC (Proofof-Concept) Hub to accelerate business operators’ challenge to innovation using financial technology. The Hub will offer continuous support
in cooperation with other relevant authorities as necessary by forminga special working team within the FSA for each selected PoC project.
There have been three PoC projects so far.
The Act of Special Measures for Productivity Improvement waspromulgated on 23 May 2018. This new Act seeks to establish a ‘regulatory sandbox’ to develop an environment in which businesses are able
to conduct demonstration tests and pilot projects for new technologies
and business models, such as AI and IoT, which are not envisaged under
existing regulations, with a limited number of participants and predetermined implementation periods. This environment will allow businesses to conduct pilot projects and demonstration tests quickly andcollect data that may contribute to regulatory reforms.
19 Does the regulator in your jurisdiction have formal
relationships or arrangements with foreign regulators in
relation to fintech activities?
On 9 March 2017, the FSA announced that it had exchanged letters with
the UK’s FCA on a cooperation framework to support fintech companies. This arrangement provides a regulatory referral system for innovator businesses from Japan and the UK seeking to enter the other’smarket. The arrangement also encourages the regulators to share information about financial services innovation in their respective markets,
reduce barriers to entry in a new jurisdiction and further encourage
innovation in both countries.
On 13 March 2017, the FSA announced that it had established aframework with the Monetary Authority of Singapore (MAS) to enhance
fintech links between Japan and Singapore. The framework enables the
FSA and the MAS to refer fintech companies in their country to the other’s markets, and outlines how the referred companies can initiate discussions with the regulatory bodies in the respective jurisdictions andreceive advice on their regulatory frameworks. The framework also setsout how the regulators plan to share and use information on financial
services innovation in their respective markets.
20 Are there any local marketing rules applicable with respect tomarketing materials for financial services in your jurisdiction?
There are a number of important rules in relation to marketing materials for financial services. For example, the following financial services require licences under the respective laws listed, and these laws
regulate the content and manner of advertisements conducted by firms
licensed for those services:• banking services – the Banking Act;• services related to securities or derivatives (including securities
offering (such as crowdfunding), investment management or advisory services) – the FIEA;• lending-related services (to the extent not banking businesses) –the Money Lending Business Act;• funds transfer service – if allowed as an exemption from regulation
under the Banking Act by operating the businesses under a funds•••

transfer service provider licence to the extent not exceeding limitof the amount for transfer – the Payment Services Act;
credit card issuing services, merchant acquiring services, acquirer’s agency services – the Instalment Sales Act;prepaid card issuing services – the Payment Services Act; andinsurance services – the Insurance Business Act.

Although details of the regulations vary among the above laws, generally speaking, they require that advertisements include certain information, such as names, licence numbers and contact information of
the licensed firms, as well as certain other information that is specifically set out in the respective laws as being important to the customer
in its decision-making, and also stipulate other matters regarding theform of any advertisement, such as minimum font size, among others.
In addition, the Specified Commercial Transactions Act sets forthcertain requirements regarding advertisements for services provided
by mail or online-order systems (whether a cooling-off period applies,etc). It is currently proposed by the government that the Consumer
Protection Act be amended to regulate ‘annoying’ advertisements via
email or internet (eg, pop-up messages warning of virus infection thatcannot be closed until the user subscribes to the anti-virus software).
21 If a potential investor or client makes an unsolicited approach
either from inside the provider’s jurisdiction or from anotherjurisdiction, is the provider carrying out a regulated activity
requiring a licence in your jurisdiction?
Yes.
22 If the investor or client is outside the provider’s jurisdiction
and the activities take place outside the jurisdiction, is theprovider carrying out an activity that requires licensing in its
jurisdiction?
As long as the banking corporation or securities firm that provides
the service is a company established under the laws of Japan (or theJapanese branch of a foreign banking corporation), then yes. For example, if a Japanese company provides investment advice to a person outside Japan, the company is required to be registered under the FIEA.
As long as the banking corporation or securities firm that provides
the service is a company established under the laws of a foreign jurisdiction (and without an office or branch in Japan), it is generally understood it will not require a licence in Japan.
23 Are there continuing obligations that fintech companies mustcomply with when carrying out cross-border activities?
In addition to licensing requirements, fintech companies must comply
with various obligations applicable to the specific business. For example, banks, securities firms and certain other businesses are required
to verify the identity of customers when facilitating cross-bordertransactions.
Distributed ledger technology
24 Are there any legal or regulatory rules or guidelines inrelation to the use of distributed ledger (including blockchain)technology in your jurisdiction?
Other than rules applicable to virtual currencies (see question 25), there
are no legal or regulatory rules or guidelines specifically applicable tothe use of distributed ledger (including blockchain) technology inJapan, though it is necessary to consider legal issues based on existinglaws and regulations. Some self-regulating organisations are considering what kind of guidelines for use of distributed ledger technology
they should have; however, at present, there are no guidelines that may
be relied upon by operators in the field.
Digital currencies
25 Are there any legal or regulatory rules or guidelines applicableto the use of digital currencies or digital wallets, including
e-money, in your jurisdiction?
The Payment Services Act is the principal law regulating the use of digital currencies or digital wallets.
Digital currencies or digital wallets (IC-type, server-type, or otherwise) may be categorised as ‘prepaid payment instruments’ under67

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the Act. An issuer of prepaid payment instruments ‘for own business’(ie, prepaid payment instruments that can only be used for the purpose of paying consideration for certain types of transactions with theissuer of the instruments, or those who have a close relationship with
the issuer) is required to file a written notification with the local financebureau when the total amount of the unused balances (the ‘unusedbase date balance’) arising from all such instruments exceeds ¥10 million on 31 March and 30 September (and, in certain exceptional cases,
30 June and 31 December) of any year.
Only a corporation that is registered with the relevant regulatory
authority may issue prepaid payment instruments that are not ‘for own
business’.
An issuer of prepaid payment instruments (whether instruments‘for own business’ or not) that does not comply with these requirements will be liable to criminal punishment. An issuer of prepaid payment instruments that has filed the written notification or is registeredis also subject to other requirements (eg, when the unused base datebalance exceeds ¥10 million, the issuer must make a security deposit
in an amount equivalent to at least half the amount of the unused basedate balance).
Virtual currencies such as bitcoin are not be categorised as ‘prepaid
payment instruments’. Businesses engaged in the sale and purchase of,or certain other transactions in, virtual currencies may be categorisedas ‘virtual currency exchange operators’. Those permitted to engage
in such businesses are limited to (i) stock companies under Japan’sCompanies Act; and (ii) foreign companies that have a business officein Japan which has an individual domiciled in Japan as its representative in Japan, and which carry out that business in the course of trade in
a foreign jurisdiction under a registration that is the equivalent to theregistration under the Payment Services Act pursuant to the provisionsof laws and regulations of that foreign jurisdiction equivalent to that
Act. No person may engage in a ‘virtual currency exchange operator’business unless registered with the relevant regulatory authority. A person who operates a business as a registered virtual currency exchange
operator who does not comply with these requirements will be liable tocriminal punishment.
In addition to the requirements above, both issuers of prepaid payment instruments who filed the written notification or are registered,and registered virtual currency exchange operators, must comply withother applicable laws, such as requirements for confirming the personal
identity of customers, for compiling and retaining personal identification records and transaction records, and for notifying the authorities
of suspicious transactions under the Act for Prevention of Transfer of
Criminal Proceeds (see question 51).
26 Are there any rules or guidelines relating to the operation ofdigital currency exchanges or brokerages in your jurisdiction?
The Payment Services Act regulates the operation of digital currency
exchanges or brokerages in Japan.
The FSA is developing administrative guidelines related to virtual
currency exchange service providers. These administrative guidelines
were originally prepared in order to clarify the regulatory perspectiveof the FSA in cases where the FSA supervises virtual currency exchange
services providers. However, in practice, they are obligatory guidelines
for individual virtual currency exchange service providers to comply
with. These administrative guidelines require that individual virtual
currency exchange service providers (a) institute an implementation
plan for compliance with applicable laws and regulations (‘complianceprogramme’) and a code of conduct (code of ethics, compliance manual); and (b) properly implement several measures, such as know-yourcustomer procedures, and anti-money laundering measures, from theperspective of ‘appropriateness of the service’. The guidelines also
require that the service providers:• consolidate a system for providing explanations and information
to clients in accordance with the nature of the virtual currencies
handled and such clients’ trading posture;• consolidate a system-risk management structure; and• properly implement the supervision, management and monitoringof outsourced contractor, from the perspective of ‘administrative
operations’.

27 Are there legal or regulatory rules or guidelines in relation
to initial coin offerings (ICOs) or token generating events inyour jurisdiction?
At present, clear rules and guidelines have not been introduced for
ICOs (see ‘Update and trends’). It appears that the FSA categorised
ICO tokens into security tokens and other tokens, including utility
tokens. The regulatory regime will differ depending on the categorisation of the token.
Virtual currency type
When the token (i) can be used for the purpose of paying consideration for the purchase of goods or services to unspecified persons, andcan be exchanged with fiat currency with unspecified persons acting
as counterparties, or (ii) can be mutually exchanged with another virtual currency with unspecified persons acting as counterparties, it falls
under the virtual currency type (see question 25 regarding the conceptof virtual currency), and thus the provision of the token by its issuer
will fall under either ‘sale of virtual currency’ or ‘exchange of virtual
currency for another virtual currency’. When a business is engaging
in this activity, it is required to register as a virtual currency exchange
services provider.
Security token typeThe security token holder is entitled to receive a distribution of the
profits made from the projects operated using the proceeds/funds collected through issuance of a token. Where the token can be purchasedby fiat currency, or virtual currency, which is deemed as a purchase by
fiat currency, the token falls under collective investment scheme; theissuer’s solicitation of the token acquisition will be a financial instruments business (Type II Financial Instruments Business); and registration as such is required under the FIEA.
Characteristics of tokens
ICOs are classified in terms of the rights granted to token holders.
In addition to the FSA’s classification mentioned above, there may
be tokens that could fall under ‘prepaid payment instruments’ (seequestion 25 regarding the concept of ‘prepaid payment instruments’).
In that case, depending on whether the tokens are ‘prepaid payment
instruments for own business’ or ‘prepaid payment instruments for athird-party’s business’, the issuer will either be required to file a notification (when the unused base date balance of its prepaid payment
instruments for own business exceeds a specific amount) or register.
It is also necessary to provide a security deposit when issuing tokens
categorised as ‘prepaid payment instruments type’.
Securitisation
28 What are the requirements for executing loan agreements
or security agreements? Is there a risk that loan agreements
or security agreements entered into on a peer-to-peer ormarketplace lending platform will not be enforceable?
For loan agreements, pursuant to the Interest Rate Restriction Act,
interest plus lending-related fees must generally not exceed 15 per centper annum; an agreement by a borrower to pay interest or fees (or both)would be void to the extent exceeding the limit.
Regarding security agreements, a principle under the Civil Codeis that a security interest grantee must be the holder of the secured
obligation. This means that it would be difficult to adopt a structurein which a single security agreement is entered into by and between
a security grantor and a single security grantee (eg, a security agent)to secure loans provided and held by multiple investors. Solutions forthis issue can include: a lending platform provider receiving funds as aborrower from investors as lenders and then turning around and providing loans to target businesses in its own name; or multiple investors
becoming direct lenders to target businesses, a ‘parallel debt’ corresponding to the loans being created and granted to the platform provider, with a security interest being granted to the platform provider
to secure the parallel debt. The latter approach is, however, not welltested in P2P or marketplace lending practice so far.
Under Japanese law, a blanket security arrangement covering all
types of assets to be provided as collateral is not available; a separate
security agreement is needed to be executed to create a security interest per asset. Typically, these might include a real estate mortgage,68

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JAPANshare pledge, pledge or security assignment of patents, trademarks,
security assignment of trade receivables, security assignment of inventories, among others.
Methods of perfection of security interests differ depending on theasset. The following are some examples:• real estate mortgage – registration;• share pledge – receipt and holding of share certificates;• pledge or security assignments of patents or trademarks– registration;• security assignment of trade receivables – notice to or acknowledgement by debtors by a letter with a fixed date stamp on it, or
registration; and• security assignment of inventories – notice to or acknowledgment by debtors by a letter with an affixed date stamp on it, or
registration.
There are no particular general requirements (such as use of ‘deeds’
and such like) under Japanese law for the execution of loan agreements and security agreements; how a Japanese party executes suchan agreement would need to be examined in each case. Given thesecomplexities, experienced legal counsel should be sought before starting up a P2P lending platform in Japan.
29 What steps are required to perfect an assignment of loans
originated on a peer-to-peer or marketplace lending
platform? What are the implications for the purchaser if theassignment is not perfected? May these loans be assigned
without informing the borrower?
Perfection of assignment of a loan originated on a P2P lending platform would most likely be made by notice to or acknowledgement by
the borrower by a letter with an affixed date stamp on it.
If the assignment is not perfected, the borrower can be discharged
from the loan by repayment to the loan assignor, and a third party thatobtains an interest in the loan after the assignment (eg, a tax authority
seizing the loan to collect tax from the loan assigner or a bankruptcy
receiver of the loan assignee) can assert a position prioritised over theloan assignee.
These loans may be assigned by an agreement between an assignor
and an assignee (where informing the borrower is not required) unlessassignments are contractually restricted by an agreement between theassignor and the borrower, where the borrower’s waiver of the restriction is required for the assignment.
Regarding perfection, the method of perfection as an alternative
to a notice to or acknowledgement by a borrower is a registration of
the assignment with a legal affairs bureau. Once an assignment isregistered, the assignment is perfected against a third party (without
informing the borrower), and the borrower must be notified only at
the time of the assignee demanding or receiving a payment (the noticemust be made by delivering a certificate of the registration).
30 Will the securitisation be subject to risk retention
requirements?
The supervisory guidelines prepared by the FSA provide for the application of risk retention requirements for financial institutions handlingdeposits, such as banks, insurance companies and securities companies (banks, etc) when the banks, etc are handling securitised financial
products. (Note: The FSA’s supervisory guidelines are given the statusof a manual for the internal use of FSA staff responsible for administrative supervision, but they are also made public and, in practice, financial institutions are required to observe these guidelines.)
Under the risk retention requirements:(i) when banks, etc, invest in securitised products, they are required toconfirm that the originator continues to hold a certain portion of
the risk in the underlying asset; and(ii) in cases where the originator does not continue to hold such a riskof the underlying asset, the banks, etc, are required to closely scrutinise the involvement of the originator in the underlying asset,
and the quality of the underlying asset.
Under the risk retention requirements, an originator is expected toretain the risk. However, such supervisory guidelines are applicable
only to banks, etc, rather than the originator. Also, under the risk retention requirements, the compulsory obligation to continuously hold aportion of the risk of the securitised product is not imposed upon theoriginator, but, instead, (i) and (ii) above are required by banks, etc,that are investing in such securitised products. Accordingly, even incases where risk retention is not maintained by the originator, the bundling and acquisition of securitised products itself is not forbidden,
and by carrying out close scrutiny of the involvement of the originatorin the underlying asset, and the quality of the underlying asset, banks,etc, are permitted to bundle or acquire the securitised products.
Also, under the supervisory guidelines, there are no provisions
regarding the risk posture that the originator should have regarding
securitised products, nor is there a specific risk retention ratio that theoriginator must hold continuously.
31 Would a special purpose company for purchasing andsecuritising peer-to-peer or marketplace loans be subject toa duty of confidentiality or data protection laws regarding
information relating to the borrowers?
A special purpose company (SPC) is subject to the Personal Information
Protection Act regarding personal information of individuals in relation to borrowing. This is Japan’s main data protection law. The SPC
may also be subject to a confidentiality obligation to the borrowers.
Intellectual property rights
32 Which intellectual property rights are available to protect
software, and how do you obtain those rights?
Both copyright and patent protections are available for software.
Software may be registered as a patent under the Patent Act if it canbe deemed as a ‘computer program, etc’, which means a computer program or any other information that is to be processed by an electronic
computer equivalent to a computer program. Registration as a patent(a prerequisite to receiving patent rights) takes time because the Patent
Office conducts a detailed examination of the application. However,copyright protection is available without registration in the case ofsoftware that includes thoughts or sentiments expressed creatively;
these rights can also be registered through the Software Information
Center.
33 Is patent protection available for software-implemented
inventions or business methods?
Business methods may be registered as patents in Japan if the method
can be demonstrated to be a new ‘highly advanced creation of technical ideas utilising the laws of nature’. However, the requirements forbusiness method patent registration are stringent, and, as a practicalmatter, even once registered, the methods can often be reasonably
easily imitated without infringement by sidestepping the patent. For
these reasons, business method patent applications are rare. In practice, business methods are commonly protected through trademarks
used in association with the methods and through a web of licensing
and other agreements.
34 Who owns new intellectual property developed by an
employee during the course of employment?
The Patent Act allows an employer to acquire the right to obtain a patent for an employee’s invention created in the course of employment
from the time that the invention is created, either by prior agreementwith the employee, or by prior inclusion of the right in its employment
regulations and such like. Any assignment by the employee of its rightto obtain such a patent to a third party in breach of the employer’s rightis invalid.
The Copyright Act stipulates that where a computer program iscreated by an employee in relation to the business of the employer (ifa legal entity), on the initiative of the employer, then the authorship of
the program is attributed to the legal entity unless otherwise stipulated
by contract, employment regulations or the like at the time of the creation of the work.
35 Do the same rules apply to new intellectual property
developed by contractors or consultants? If not, who owns
such intellectual property rights?
Contractors and consultants can acquire the right to obtain a patentor copyright for inventions developed by them unless the engagement69

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contract provides for the acquisition of such intellectual property or
licences by the client; the contract can be agreed either before or after
the invention is created or the computer software is made.
36 Are there any restrictions on a joint owner of intellectual
property’s right to use, license, charge or assign its right in
intellectual property?
When a patent is jointly held, each of the joint owners may independently use the patent and seek damages or injunctions against infringing third parties. However, the sale or licensing of the patent requires
the consent of the other joint patent holders.
When a copyright is jointly held, each of the joint owners may seek
damages or injunctions from infringing third parties. The consent ofother joint copyright holders is required for the sale, licensing and useby third parties of the copyrighted work.
37 How are trade secrets protected? Are trade secrets kept
confidential during court proceedings?
Trade secrets are protected under the Unfair Competition Prevention
Act. A trade secret under the act is a production method, sales method,or any other technical or operational information useful for business activities that is controlled as a secret and is not publicly known.
Separately from the legislation itself, administrative principles forinterpretation of the Unfair Competition Prevention Act provide a flexible interpretation of what constitutes ‘control’ which will most likely
impact future judicial rulings on the point. For example, the principles
can be read as stipulating that strict restriction of access to information
is not a prerequisite of ‘control’.
During court proceedings for the infringement of business interests by unfair competition, trade secrets may be protected by protective order based on the Unfair Competition Prevention Act or an orderwith respect to Restriction on Inspection, etc, for Secrecy Protection inProtection based on the Civil Procedure Act.
38 What intellectual property rights are available to protect
branding and how do you obtain those rights?
Brands are usually protected by trademark. It is necessary to registera trademark with the Patent Office in order to enjoy protection as atrademark, although in some cases protection may also be available
under the Unfair Competition Act for brands that are not registered asa trademark. Causing confusion between one’s own products or services and those of another party (known as the ‘act of causing confusion’) or wrongly using a famous indication of another person as one’s
own, by displaying the name of a well-known product, etc, of anotherparty on similar or identical products, etc, is prohibited. However,these cases are less successful than trademark cases because it must
be proven that the product or indication is well known or famous.
39 How can new businesses ensure they do not infringe existing
brands?
It is relatively easy to look up whether a brand is a registered trademark or a registered trade name. Registered trademarks can belooked up at www3.j-platpat.inpit.go.jp/cgi-bin/TF/TF_AREA_E.
cgi?1470219956846. (Registered trade names can also be searched
online.)Some attorneys and most patent attorneys are accustomed todoing these searches.
40 What remedies are available to individuals or companies
whose intellectual property rights have been infringed?
A patent holder or the exclusive licensee or copyright holder can claim
for actual damages (but not punitive damages) from the infringer for
losses incurred as a consequence of the infringement. The court canalso be requested to issue an injunction order or take similar action.
In the case of injunctions, the requirements are the presence ofprotected rights and circumstances whereby an injunction is necessary
to avoid irreparable damage. Japanese courts will require the claimant
to post a security deposit before injunctive relief is ordered.
Although injunctive relief can expedite dispute resolution,
Japanese courts, in principle, will not issue ex parte orders and will
have one or more hearings to hear the arguments from both parties,
which means both parties will be called to the hearings.

Patent invalidity is one of the most common defences; when the
defendant raises the defence of patent invalidity, in approximately
60 per cent of cases the court has made a judgment on this point andapproximately 70 per cent of past judgments have been against the patent holder.
The vast majority of intellectual property rights infringement remedies are civil, but in some cases criminal penalties can apply, especially in copyright and trademark cases.
41 Are there any legal or regulatory rules or guidelines
surrounding the use of open-source software in the financial
services industry?
There are no specific legal or regulatory rules or guidelines surrounding
the use of open-source software.
Data protection
42 What are the general legal or regulatory requirements relating
to the use or processing of personal data?
The Personal Information Protection Act applies to the handling andprocessing of data including personal information. The My Number
Act sets out rules regarding the handling of numbers under the My
Number system, which is used for tax and administrative procedures
relating to employment. The Personal Information Protection Act andthe My Number Act stipulate different requirements for entities inparticular industries. Detailed guidelines for some industries, such as
telecommunications, finance and healthcare, have been issued, and theguidelines for the fintech industry are described in question 43.
43 Are there legal requirements or regulatory guidance relating
to personal data specifically aimed at fintech companies?
The Personal Information Protection Committee and the FSA have set
out guidelines in relation to the Personal Information Protection Act,the ‘Guidelines for Personal Information Protection in the Financial
Field’, which set out guidelines for the treatment of sensitive information, restrictions based on the purpose of use, supervision of trustees, among others, and ‘Practical Guidelines for the Security Policies
Regarding the Personal Information Protection in the Financial Field’.
The entities regulated under the Instalment Sales Act must comply withthe ‘Guidelines Regarding Personal Information Protection Regarding
Credit Among Economic Industry’. The ‘Guidelines for the Proper
Handling of Specific Personal Information in the Finance Industry’apply to the My Number Act in the financial field.
44 What legal requirements or regulatory guidance exists in
respect of anonymisation and aggregation of personal data forcommercial gain?
Amendments to the Personal Information Protection Act added theconcept of ‘anonymised personal information’, which is information
regarding individuals, obtained by anonymising personal informationor otherwise processing personal information so that it is no longer
able to identify the particular individual. When processing anonymised
personal information, it is necessary to release to the public the items
regarding such anonymised personal information that have been created. When providing anonymised personal information to a third
party, it is necessary to specify publicly the kinds of information thatare provided to the third party, and inform the third party that the personal information is anonymised. Creators of anonymised personal
information are prohibited from disclosing deleted items, methods ofprocessing, or referencing the anonymised information against otherinformation for the purpose of identifying the person related to thepersonal information used in the creation of the anonymised information, and the recipient is prohibited from acquiring such deleted items,
methods of processing and references.
A recent amendment to the Banking Act stipulates that entities(such as fintech companies) that acquire bank account information indigital form from banks by electronic means are required to registerwith the FSA. In addition, under the amendment and in order to acquire
such information from banks, such entities must enter into contracts
with the supplying banks that contain clauses stipulated in the amendments before the grace period. Most of such entities have yet to enter
into contracts with banks containing these provisions, and many fintech
companies may find it difficult to obtain the banks’ approval to do so.

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Update and trends
Banking API
The Amended Banking Act came into effect on 1 June 12018 and, in
anticipation of its implementation, financial institutions published the‘Policy regarding collaboration and cooperation with electronic settlement agents’, according to which 130 Japanese banks have expressed
their intention to introduce an open API. We anticipate that the collaboration and cooperation between banks and fintech companies will
become more rapid and that more innovative financial services will beoffered to customers.
Virtual Currency Exchange Services
On 26 January 2018, Coincheck, Inc, one of Japan’s major virtual currency exchanges, suffered a loss equivalent to approximately ¥58 billion
in NEM and other virtual currencies due to hacking. In response tothis, the FSA conducted an investigation of virtual currency exchange
service providers. As a result of this investigation, it became clear thatsystems adopted by several virtual currency exchange service providers were inconsistent with the requirements of applicable laws andregulations, and this resulted in administrative actions against them.
Additionally, at the time of writing, the FSA has issued warnings to two
foreign virtual currency exchange service providers that were engaged
in unregistered business activities directed toward residents of Japan.
The FSA also announced that it would take a stricter approach for new
registrations of virtual currency exchange service providers.

Outsourcing, cloud computing and the internet of things
45 Are there legal requirements or regulatory guidance withrespect to the outsourcing by a financial services company ofa material aspect of its business?
With regard to outsourcing by banks, it is required that specified measures be taken to ensure that the provider of the outsourced services has
the capability to carry out such services accurately, fairly and efficiently
in accordance with the nature of the services outsourced; and to ensure
the necessary and proper supervision, and such like, of the service provider of the outsourced services.
Similarly, with regard to outsourcing by virtual currency exchange
service providers, depending on the nature of the services outsourced,
it is required that (i) measures be taken to ensure that the provider of theoutsourced services has the capability to carry out the services properly
and reliably; (ii) measures be taken to ensure the necessary and proper
supervision of the provider of the outsourced services, and such like,through confirmation of, both regularly and whenever necessary, how
the provider of the outsourced services is actually implementing therelevant services, and (iii) other measures to be predetermined.
A risk-based approach and an IT governance framework wereadopted with regard to the security management measures for outsourced information systems in the Report of the Council of Experts on
Outsourcing in Financial Institutions issued in June 2016 by the Center
for Financial Industry Information Systems (FISC).
Further, in June 2017, the FISC suggested that when banks open
their API with an eye to cooperating with fintech firms, in certain cases
the responsibility for safety measures imposed upon fintech firms at therequest of financial institutions may be less onerous than that imposed
upon providers of outsourced services.
46 How common is the use of cloud computing among financial
services companies in your jurisdiction?
The use of cloud computing is relatively widespread among major
financial institutions and internet banks. In contrast, many small
and medium-sized financial institutions are struggling to make useof cloud computing due to a lack of IT manpower and concerns overcybersecurity.
However, the ‘FISC Security Guidelines on Computer Systems for
Banking and Related Financial Institutions’ (FISC Guidelines) wererevised in March 2013. This revision was intended to spread the use ofcloud computing, and the FISC has correspondingly promoted the useof cloud services, so it is likely that more financial institutions will cometo use cloud computing more extensively.

Following the mention of virtual currencies in the joint statementof the G20 finance ministers and central bank presidents, the focus is
now on what policy approach Japan’s regulatory authorities will take toregulate virtual currency exchange businesses.
ICOs
In Japan, the FSA has published a cautionary report on ICOs directed toboth users and service providers.
In this report, users are warned that the value of tokens issued in
an ICO can suddenly drop, and there is a possibility of fraud. Service
providers are warned that the ICO, depending on how it is structured,
can be subject to regulation under the Payment Services Act and/or the
FIEA.
Also the FSA has made it clear that ‘with regard to fraudulent ICOs
. . . [it] would promote a voluntary response by the industry, and that it
would endeavour to protect users through the issuance of reports warning the risks of ICOs to users and service providers’.
In light of the trends among regulatory authorities internationally,
and the above-mentioned joint statement of the G20 finance ministers
and central bank presidents, on this point, the focus is now on what
policy approach Japan’s regulatory authorities will take to regulate ICO
transactions.

47 Are there specific legal requirements or regulatory guidancewith respect to the use of cloud computing in the financial
services industry?
The Banking Act and other legislation stipulates that financial institutions are obliged to carry out safety measures for their systems, among
other things. Based on such provisions, subordinate rules, guidelines,
and inspection manuals describe the actions to be taken to comply withthese obligations.
If inspectors find problems with an organisation’s risk management systems in relation to information security they can require thatthe business be inspected further for conformity to the ‘FISC Security
Guidelines on Computer Systems for Banking and Related Financial
Institutions’. These financial institutions therefore see these guidelines
as a kind of regulation. The Report of the Council of Experts on the
Usage of Cloud Computing by Financial Institutions serves as a usefulreference as it formed the basis of the revision of the above-mentioned
guidelines.
48 Are there specific legal requirements or regulatory guidancewith respect to the internet of things?
There is no specific legal requirement and regulatory guidance withrespect to the internet of things.
Tax
49 Are there any tax incentives available for fintech companies
and investors to encourage innovation and investment in the
fintech sector in your jurisdiction?
There are no tax incentives introduced especially for fintech companies. However, as of June 2018, there are some more general tax incentives available to fintech companies and investors, as follows:• Individual investors who invest in qualified small to medium-sizedcompanies (start-ups) can deduct one of the following under certain conditions:• the amount invested in the start-up minus ¥2,000 from taxable income (maximum deduction is 40 per cent of total taxable income or ¥10 million, whichever is lower); or• the whole amount invested in the start-up from capital gains(there is no maximum amount).
• If individuals investing in a qualified unlisted start-up have a capital loss after the sale of shares in the start-up, then such individuals
can offset this against other capital gains and the losses can be carried forward for up to three years.
• Companies may elect to claim accelerated depreciation of theacquisition cost or a tax deduction if they purchase certain equipment under certain conditions.

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Until March 2019, 14 per cent (17 per cent for small to medium-sizedcorporations) of qualified research and development (R&D) expenses
are deductible from annual corporate tax. Those rates will become
8 per cent to 10 per cent (12 per cent for small to medium-sized corporations) from April 2019. Additional tax incentives are available for
special, qualified R&D expenses, among others.
Competition
50 Are there any specific competition issues that exist withrespect to fintech companies in your jurisdiction or that may
become an issue in future?
Earlier this year, the Japanese government started discussions onwhether to regulate large IT companies’ unfair trade practices; thedirection of these discussions will be announced by the end of 2018.

Financial crime
51 Are fintech companies required by law or regulation to haveprocedures to combat bribery or money laundering?
Two recent amendments have been made to the Act on Preventionof Transfer of Criminal Proceeds. The first, which came into forcein October 2016, includes treating transactions between politically
exposed persons as high-risk transactions. The second amendment,
which came into force in April 2017, requires virtual currency exchange
operators to confirm the personal identity of customers, to compile
and retain personal identification records and transaction records,
and to notify the authorities of suspicious transactions. Also, under the
Payment Services Act, virtual currency exchange operators must submit annual reports on their businesses and quarterly reports on management of customers’ assets to the regulator and the regulator has theright to conduct on-site inspection and to issue business improvement
orders. These requirements and powers in effect require virtual currency exchange operators to combat bribery and money laundering.
52 Is there regulatory or industry anti-financial crime guidance
for fintech companies?
No.

Ryuichi Nozaki
Yuri Suzuki
Hiroyuki Sanbe
Ryosuke Oue
Takafumi Ochiai
Kenichi Tanizaki

ryuichi.nozaki@aplaw.jp
yuri.suzuki@aplaw.jp
hiroyuki.sanbe@aplaw.jp
ryosuke.oue@aplaw.jp
takafumi.ochiai@aplaw.jp
kenichi.tanizaki@aplaw.jp

Fukoku Seimei Building
2-2-2 Uchisaiwaicho, Chiyoda-ku
Tokyo 100-0011
Japan

Tel: +81 3 5501 2111
Fax: +81 3 5501 2211
www.aplaw.jp/en/

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Getting the Deal ThroughAcquisition Finance

Enforcement of Foreign Judgments

Pharmaceutical Antitrust

Advertising & Marketing

Environment & Climate Regulation

Ports & Terminals

Agribusiness

Equity Derivatives

Private Antitrust Litigation

Air Transport

Executive Compensation & Employee Benefits

Private Banking & Wealth Management

Anti-Corruption Regulation

Financial Services Compliance

Private Client

Anti-Money Laundering

Financial Services Litigation

Private Equity

Appeals

FintechPrivate M&A

Arbitration

Foreign Investment Review

Product Liability

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Franchise

Product Recall

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Fund Management

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GamingPublic M&A

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Gas Regulation

Public-Private Partnerships

Aviation Liability

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Public Procurement

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Real Estate

Cartel Regulation

Healthcare Enforcement & Litigation

Real Estate M&A

Class Actions

High-Yield Debt

Renewable Energy

Cloud Computing

Initial Public Offerings

Restructuring & Insolvency

Commercial Contracts

Insurance & Reinsurance

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Competition Compliance

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Labour & Employment

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Legal Privilege & Professional Secrecy

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Data Protection & Privacy

Life Sciences

Structured Finance & Securitisation

Debt Capital Markets

Loans & Secured Financing

Tax Controversy

Dispute Resolution

Mediation

Tax on Inbound Investment

Distribution & Agency

Merger Control

Telecoms & Media

Domains & Domain Names

MiningTrade & Customs

Dominance

Oil Regulation

Trademarks

e-Commerce

Outsourcing

Transfer Pricing

Electricity Regulation

Patents

Vertical Agreements

Energy Disputes

Pensions & Retirement Plans

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