Central resources include the Japan Blockchain Association, and this document by the FSA.

In April 2017, new regulations passed by the Financial Services Agency of Japan (the FSA) in December 2016 came into force. The most detailed English-language description of these recent regulations and their legal implications can be found in a financial services letter by Anderson Mо̄ri and Tomotsune (AMT-law) here, and a journalized summary of critical changes can be found here. Key requirements include:

• Any entity intending to provide a digital currency exchange service must be registered with the Prime Minister of Japan (this registration ratifies entities as “Virtual Currency Exchange Service Provider(s)”
• The minimum capital requirements are 10 million yen (approx. 88,000 US dollars as of 12/23/17).
• Various other requirements pertaining to theft/loss defense systems, internal governance requirements, and audit regulations are outlined in the AMT bulletin linked above.

The required documents to be submitted with the registration application for VCESP status can be found on page 5 of this document. A full list in Japanese of the requirements to obtain VCESP status, along with the associated documents, can be found on the FSA website here. Registered firms must declare a list of trading currencies to be approved during registration, and are not able to independently alter or modify this list without going through the FSA.

It should be noted that the requirements for obtaining VCESP status are extremely stringent, and the number of firms that have successfully registered is exceedingly small. According to the latest database published by the FSA, there are only 15 firms legally registered to trade VC in the whole of Japan, and the range of currencies traded is narrow. See below for more details.

ICO Token Sales

The Japan Blockchain Association has published guidelines for ICOs to Japanese residents, which can be found below. Japan has no specific ICO regulations, but the Payment Services Act (PSA) also called the Virtual Currency Act (VCA) makes token sales a matter requiring extensive registration procedures at the risk of severe penalties. In particular:

• Only registered Virtual Currency Exchange Business Operators are authorized to handle ICO tokens deemed as virtual currency (this requires notifying the FSA).
• If ICO tokens are deemed prepaid payment instruments, registration with/notification to the FSA may still be required.
• If the ICO is deemed to be a collective investment scheme/fund, then fund regulations pursuant to the FIEA (FIEA Fund Regulations) will apply.
• If regulations under these acts do not apply, the ICO tokens will be regulated under the Specified Commercial Transaction Act. In all cases, it is strongly advised for firms intending to engage in token selling in Japan either through a subsidiary or an independent private company notify the Financial Services Agency of Japan.

Blockchain

Japan offically recognizes bitcoin and digital currencies as money, and is generally a blockchain-friendly country. Blockchain technology is increasingly used in the banking industry, and it would appear unlikely for any disruptive changes in its legal status to occur in the near future. In addition, the government is planning on escalating the use of blockchain technology to facilitate the systems for accepting governmental contract bids - see here for more information.

Key sources

Financial Services Agency of Japan

List of firms legally registered to trade VC in Japan

Japan Blockchain Association guide on ICO token sales to Japanese residents