AMT’s FinTech PracticeJan 2019
|Practice Areas||Finance and Financial Institutions|
“Fintech”, a word originally created by combining “Finance” and “Technology”, was once an esoteric buzzword, but it is now so commonly used (in the media, published reports from the Japanese Financial Services Agency (the “JFSA”), and other organizations) that it has become firmly entrenched in our vocabulary. In Japan, as compared to other jurisdictions in the financial regulatory landscape, this is particularly true as the country may be one of the most advanced in Fintech.
Japan has actively introduced and developed legislation to manage developments in Fintech. As a part of regulators’ initiatives, on April 27, 2016, the JFSA announced the establishment of a “Panel of Experts on FinTech Start-ups.” According to the JFSA, the purpose of this Panel was to create a framework allowing experts to discuss possible measures to create a “FinTech ecosystem.” (For further details, see the link below.)
On September 26, 2018, the JFSA published a report entitled "For Providing Better Financial Services in the Era of Transition Financial Services Policy: Assessments and Strategic Priorities 2018”. One of the factors considered in the strategic direction and priorities for the 2018 program year was the changing environment of finance in light of "accelerating digitalization”. The publication also discussed seven initiatives for contending with the era of transition, and this includes the promotion of Fintech.
Fintech-related legislation recently introduced in Japan includes the following:
The Payment Services Act (the “PSA”) was amended to introduce registration requirements for “Virtual Currency Exchange Service Providers”. For purposes of the PSA, Virtual Currency Exchange Services has been defined to include any of the following acts carried out as a business: (i) the sale/purchase of Virtual Currency or exchanges for other Virtual Currency; (ii) intermediary, agency, or delegation services for the acts listed in (i) above; or (iii) the management of users’ money or Virtual Currency in connection with the acts listed in (i) and (ii). As a consequence of this definition, not only typical cryptocurrency (virtual currency) “exchanges”, but also, so-called OTC brokers are regulated as Virtual Currency Exchange Service Providers under the PSA. Moreover, operators of a platform for initial coin offerings ("ICOs") or consultants may be considered Virtual Currency Exchange Service Providers depending on their business structure. Since this amendment to the PSA became effective on April 1, 2017, 17 “exchanges” have been registered (pursuant to the list published by the JFSA dated January 11, 2019).
In March 2017, a bill to amend the Financial Instruments and Exchange Act (the “FIEA”) was enacted in the Diet. The amendments to the FIEA introduced, among other things, certain regulations concerning “High Frequency Trading” ("HFT"). The key feature of these amendments is the newly introduced registration system for “High Frequency Traders”. The entire HFT legislation including related subordinate regulations became effective on April 1, 2018. Ten corporations (nine of which are foreign corporations) have been registered as “High Frequency Traders” (pursuant to the list published by the JFSA dated October 9, 2018).
In March 2017, a bill amending the Banking Act was enacted in the Diet to regulate “Electronic Payment Intermediate Service Providers” and facilitate open Application Programming Interface ("API"). The amendments require entities to register with the JFSA in order to provide Electronic Payment Intermediate Services. Electronic Payment Intermediate Service Providers are defined broadly enough to include intermediaries between financial institutions and customers, such as entities using IT to communicate payment instructions to banks based on the entrustment from customers, or entities using IT to provide customers with information about their financial accounts held by banks. The amendments, including relevant subordinate regulations have come into force on June 1, 2018. Since then, 21 corporations have been registered as “Electronic Payment Intermediate Service Providers” (pursuant to the list published by the JFSA dated January 18, 2019).
Anderson Mori & Tomotsune has one of the leading Fintech practices in Japan. With extensive experience across all areas of Fintech, our skilled lawyers provide innovative, up-to-date legal advice to our clients in this fast-growing and cutting-edge industry. Because of our long history of success and proven understanding of new technology, our advice is regularly sought in Fintech-related matters, including applications for licenses and regulatory approvals for business start-ups, analysis of financial regulatory issues, development and marketing of innovative financial instruments, products and transactions, and consultations and negotiations with official regulatory authorities and self-regulatory organizations.
Anderson Mori & Tomotsune is a corporate member of the Fintech Association of Japan ("FAJ") (https://www.fintechjapan.org/).