Amendments to the Payment Services Act and several
related laws concerning virtual currencies are expected to come
into effect after April 2017. In response to the amendments,
the Financial Service Agency of Japan announced the draft of
the Cabinet Office Ordinance concerning virtual currency
exchange service providers on December 28 2016. The Ordinance
sets forth the details of the rules for virtual currency
exchange service providers (VCESP).
The new regulations introduced by the Ordinance are composed
of: the conditions for registering as a VCESP and, measures for
ensuring the appropriate and proper implementation of virtual
currency exchange services.
As for the conditions for registering, the applicant must be
a stock company and have an office and a representative in
Japan. The applicant must also fulfil financial requirements,
such as a minimum capital amount of JPY 10 million ($87,300)
and a positive net assets amount.
Once registered as a VCESP, the applicant has to comply with
the following rules: (i) it must take measures for the security
management of the systems related to its virtual currency
exchange services; (ii) in cases where the applicant outsources
some of its virtual currency exchange services to external
service providers, it must supervise those external service
providers appropriately by confirming the status of the
outsourced services; (iii) it must take certain measures to
protect users, such as (a) explaining that virtual currencies
are not Japanese or foreign currencies, and, (b) producing
tri-monthly reports on the transaction records and the balances
of users' cash and virtual currencies; (iv) it must segregate
users' deposits in the form of cash and virtual currencies from
its own in a manner specified by the Ordinance; (v) it must
undergo external audits at least once a year with respect to
the segregation of management and financial statements; (vi) it
must establish internal management systems for dealing with
complaints regarding its services fairly and appropriately;
(vii) it must create and keep books and records related to its
services; and, (viii) it must prepare and submit an annual
report and quarterly reports to the relevant authority in the
form specified by the Ordinance.
Companies who have already conducted virtual currency
exchange services on the effective date of the amendment act
and the Ordinance must register within six months from the
effective date. However, the above rules apply to them even
before they register.
It should be noted that even a company registered as a VCESP
in accordance with foreign laws is not able to provide virtual
currency exchange services for people in Japan without
registering as described above.