A digital asset treasury (“DAT”) strategy refers to a company’s approach to holding and managing digital assets (often referred to as “crypto assets” in Japan) as part of its corporate balance sheet. It incorporates digital assets into the portfolio as an alternative to, or complement to, traditional cash and securities.
When focused solely on Bitcoin, this is sometimes referred to as a “Bitcoin treasury strategy.” In Japan, the term “Crypto Asset Treasury” is sometimes used, reflecting the regulatory terminology of “crypto assets,” while in international contexts “Digital Asset Treasury (DAT)” is increasingly common.
In recent years, the number of companies adopting these strategies has been increasing worldwide. In particular, the approval of Bitcoin ETFs in the United States in 2024 encouraged institutional investors to enter the market, spurring interest in direct corporate holding strategies. In Japan, listed companies have also begun to disclose digital asset holdings, drawing significant investor attention. This article provides an overview of treasury strategies and examines the key legal issues under Japanese law.
| Conclusion: Feasible under current Japanese law With appropriate measures, DAT strategies can be implemented under the current Japanese legal system. The conclusions of the main points are as follows: Legal Issues ・Crypto asset exchange business: No registration required for buying and selling of company-owned crypto assets ・Collective investment schemes: Fundraising through the issuance of stocks and CBs does not apply ・Staking and lending: No restrictions on proprietary management ・Timely disclosure: Disclosure required for important transactions and policy changes Accounting/Taxation Accounting: Market value valuation is the rule (differences exist between Japanese GAAP, IFRS, and US GAAP) ・Taxation: Taxation is generally based on year-end mark-to-market valuation, however, the 2024 amendments will allow for exemptions from year-end mark-to-market valuation taxation under certain conditions ・Audit: Prior agreement with the auditing firm is important Practical Preparations ・Investment policy decisions at the board of directors level ・Prior consultations with auditing firms and tax accountants ・Establishment of internal control and risk management systems ・Establishment of a system for disclosing information to investors Investor Perspective ・Advantages such as preferential tax treatment for stocks (20.315% vs. up to 55% for physical cryptocurrencies) and simplified investment procedures ・Double taxation at both the corporate and individual levels ・Disadvantages of business and operational risks ・Different value from cryptoasset ETFs (leverage effect, synergy with corporate value, etc.) |
MicroStrategy (now Strategy) is a US-based company known as a representative example of a successful DAT strategy. It began purchasing large amounts of Bitcoin in 2020, resulting in a significant increase in its corporate value.
In 2024, Metaplanet, a Japanese listed company, announced a full-scale DAT strategy, which attracted a lot of attention as the first such initiative in Japan.
Remixpoint Inc. is one of the companies that holds cryptoasset while emphasizing their relevance to their business. Its subsidiary, BITPoint Japan Inc., owns the crypto asset exchange BITPoint (however, the company’s shares were transferred to an outside group between 2022 and 2023), and is a company that is friendly to Web3.
| Company name | country | Strategy Features | Asset Holdings | Stock price performance |
| MicroStrategy | US | Converting the majority of cash into BTC: “Corporate BTC ETF” | A large amount of BTC | 1 year: 164% increase 5 years: 2,238% increase Market capitalization: USD 94 billion |
| Metaplanet | Japan | Purchases positioned as “financial reserve assets” | A large amount of BTC | 1 year: 490% increase 5 years: 707% increase Market capitalization: JPY 461.2 billion |
| Remix Point | Japan | Emphasis on business synergies | BTC, ETH, SOL, XRP, DOGE etc | 1 year: 120% increase 5 years: 274% increase Market capitalization: JPY 51.5 billion |
*Stock prices are as of September 9, 2025
When people think of “DAT strategies,” many think of “all-asset cryptoasset conversion” strategies like those used by MicroStrategy and Metaplanet. However, actual corporate strategies vary widely.
Companies need to choose the strategy that’s right for them based on the following four perspectives:
| Strategy Type | Features | Key Benefits | Key points to note |
| Surplus fund investment type | Allocate part of existing surplus cash to cryptoasset | ・Minimal impact on existing business ・Easy to implement in stages |
・Limited investment scale ・Limited impact on stock prices |
| Full transition type | Converting the majority of cash assets into cryptoassets | ・Maximize the benefits of price increases ・Clear position as bitcoin stock |
・High risk of price decline ・Impact on working capital ・Risks when introducing ETFs |
| Web3 Strategy Type | Emphasis on relevance to Web3 and blockchain businesses | ・Consistency with business strategy ・Easy to explain to investorS |
・Business feasibility ・Continuous business investment required ・Expert knowledge in the web3 field is essential |
| Procurement method | features | Key Benefits | Points to note |
| Surplus fund utilization type | Purchase using existing cash and deposits as funds | No additional financing required ・No dilution impact ・Can be implemented quickly |
・Limits on investment scale ・Effect on existing business funds needs to be considered |
| New share issuance | Purchased by raising funds through the issuance of new shares | Large-scale investments possible ・Avoid increasing debt ・Appealing to growth investments |
Shareholders’ meeting approval may be required ・Vulnerability may vary depending on market conditions |
| Convertible bond issuance type | Purchased by raising funds through CB issuance | ・Funding at low interest rates ・Dilution control until conversion ・Leverage effect |
Interest burden incurred ・Conversion conditions set ・Effect on credit rating |
| Investment Targets | Features | Key Benefits | Risks and points to note |
| Bitcoin only | Concentrated investment in a single BTC stock | Most liquid and stable ・”Digital gold” ・Easy to explain to investors |
・Single stock concentration risk ・No diversification effect ・Missed growth opportunities in other currencies |
| Brand diversification | Diversified investments in BTC, ETH, altcoins, etc. | ・Appropriate diversification effect ・Earn staking profits ・Capture overall market growth |
・Individual stock risks exist ・Management becomes more complex ・Tax calculations become more complicated |
| Altcoin focused | Active investment in emerging and small coins | ・High growth potential ・First-mover advantage ・Investment in innovation areas |
・Extremely high volatility ・High liquidity risk ・Difficult for investors to understand |
| Operation method | Features | Key Benefits | Risks and points to note |
| HODL (long-term holding) | Hold cryptoasset for the long term. | ・Simple operation method ・Not affected by price fluctuations ・Possibility of tax benefits (see chapter 5 of this article ) |
・Expansion of losses when prices fall ・Possibility of opportunity loss ・Ensuring liquidity |
| Staking utilization | Earn additional revenue by staking ETH etc. | ・Continuous income ・Additional return of several percent per year ・Network contribution |
・Technical risk ・Slashing risk ・Unbonding period |
| Lending utilization | Earn interest income by lending to third parties | ・Management at high interest rates ・Earn both price appreciation and interest ・Liquidity can be adjusted |
・Credit risk of borrowers ・Market liquidity risk ・Regulatory change risk |
Companies will combine these elements to create the optimal strategy based on their business, financial situation, and risk tolerance.
Furthermore, based on our conversations with advisors and related parties, it appears that many companies currently considering this strategy are seeking treasury strategies that take advantage of connections with their core business, rather than simply HODLing, perhaps in order to differentiate themselves from previous cases.
On the other hand, even when companies that do not necessarily have a strong connection between their core business and Web3 adopt a DAT strategy, there are cases where they try to explain it to shareholders and other stakeholders as a revenue model that combines stock income from staking and lending.
We will summarize the main legal issues that arise when implementing a DAT strategy in Japan. In conclusion, with appropriate measures, it is entirely possible to implement the strategy under current law.
Basic Principles Actual actions of companies acquiring and holding cryptoassets as part of their financial strategy do not constitute a “crypto asset exchange business” under the Payment Services Act, and registration is not required.
Legal Basis According to Article 2, Paragraph 15 of the Payment Services Act, a crypto asset exchange business is one that “conducts the following activities as a business”:
Reasons for non-application: The trading of cryptoassets by a company as an investment in its own portfolio is not considered to be an act conducted “as a business.”1 Also, owning a company is not “managing for others.”
Regarding fundraising through stocks, etc,: Fundraising through stocks, convertible bonds, or similar instruments, and using those funds to purchase cryptoasset, is currently not classified as a cryptoasset exchange business. While it could be formally interpreted as “raising funds from shareholders to acquire cryptoasset,” potentially suggesting the provision of cryptoasset trading services to shareholders, such an interpretation is not adopted in current practice.
Basic Concept cryptoasset investments made using funds raised by companies through the issuance of new shares or convertible bonds do not fall under the category of “collective investment schemes” under Article 2, Paragraph 2, Item 5 of the Financial Instruments and Exchange Act.
Legal Basis Due to the structure of the Financial Instruments and Exchange Act, stocks and convertible bonds are regulated as independent “securities” under Article 2, Paragraph 1, Items 5 and 9, and are a separate system from collective investment schemes (fund regulations) under Paragraph 2, Item 5.
Specific Reasons
Cases to note: If you are establishing a separate company (such as an SPC) exclusively for cryptoasset investment and soliciting anonymous partnership investments, you must carefully consider whether it qualifies as a collective investment scheme.
Regarding staking, staking conducted by companies using their own assets or on their own account does not generally fall under the category of funds (collective investment schemes) or crypto asset custody, and can be carried out without any special regulations.
Regarding lending, while money lending is regulated in Japan by the Money Lending Business Act, there are no special regulations for crypto asset lending. Companies are free to use their own cryptoassets for lending as long as they are on their own account.
Advice on Physical Cryptocurrencies Physical cryptoassets are not considered “securities” under the Financial Instruments and Exchange Act, and therefore are not subject to the Investment Advisory and Agency Business Act (Article 28, Paragraph 3). This can be classified as a general consulting service.
Cases requiring caution : Continuous, specific advice and discretionary management of cryptoasset derivatives (futures, perpetuals, etc.) may require registration as an Investment Advisory and Agency Business.
Practical Response: When providing advice including derivatives as an external advisor, it is recommended that the purpose of the contract be limited to “strategy design and risk analysis support” and that specific advice on investment decisions be avoided.
Listing Rules: The Tokyo Stock Exchange’s listing rules do not have any provisions that directly prohibit the holding of cryptocurrencies. As a legitimate investment, cryptocurrencies are likely to be treated in the same way as other investment products.
Cases where timely disclosure is required
Key points of disclosure: If your cryptoasset investment is large, you should probably include the following:
It is important for companies to establish an appropriate legal framework and implement strategies while ensuring compliance.
Some DAT companies raise large amounts of capital. In such cases, they must take into consideration the Tokyo Stock Exchange’s 300% rule (which states that if the share value dilution rate exceeds 300%, the company will be delisted unless the exchange deems it unlikely to infringe on the interests of shareholders and investors; Article 601, Paragraph 1, Item 15 of the Tokyo Stock Exchange Securities Listing Regulations and Article 601, Paragraph 12, Item 6 of the Enforcement Regulations).2
Additionally, attention should be paid to the provision known as the 25% rule (Article 432 of the Listing Regulations, Article 435-2 of the Enforcement Regulations). This rule requires a special resolution of the general shareholders’ meeting or an opinion on the necessity and appropriateness of the issuance of new shares that exceeds 25% of the total number of issued shares through a third-party allotment. Because investor ownership ratios fluctuate significantly, strict procedures are required from the perspective of protecting minority shareholders.
Accounting and tax compliance is extremely important when implementing a DAT strategy. Listed companies in particular need to properly manage tax risks while fulfilling their accountability to investors and auditors.
In accordance with Japanese GAAP (JGAAP) Practical Advisory Report No. 38, cryptoassets with an active market are valued at market price at the end of the fiscal year, with the valuation difference recorded in profit and loss. If there is no active market, they are valued at acquisition cost.
The classification on the balance sheet is determined by the purpose of holding and liquidity. If listed separately, they are shown as “cryptoassets,” etc., but if they are not significant, they are included in intangible fixed assets or other assets, etc. The classification on the income statement is determined based on the purpose and actual situation of the business. In both cases, consultation and agreement with the auditing firm is required.
Companies adopting IFRS often adopt the cost model + impairment (IAS36) for intangible assets under IAS38, but if there is an active market, they can also choose the revaluation model. In this case, upward revaluation is recorded in OCI (other comprehensive income) (the portion equivalent to the reversal of past impairment losses is recorded in profit or loss), so in principle it is not recorded in the income statement.
However, since Japanese corporate tax is calculated using fair value at the end of the period, adjustments must be made in tax returns even when IFRS is adopted, resulting in a discrepancy between accounting and tax practice.
US GAAP companies, such as MicroStrategy, apply ASU 2023-08, which requires them to record their investments at cost, then mark them to fair value at the end of each period, with the difference recognized in earnings. Unlike IFRS, these investments are always passed through the P/L rather than recorded in OCI (other comprehensive income).
Taxation based on end-of-period fair value valuation (in principle) According to the National Tax Agency Q&A, “cryptoassets with active markets” are valued at fair value at the end of the period, and the valuation difference is included in income or expenses.
The following cases are also subject to valuation:
Avoidance of year-end mark-to-market valuation taxation due to transfer restrictions (exception) The April 2024 amendments make it possible to exempt from year-end mark-to-market valuation taxation if certain requirements are met.
Requirements:
Benefits: For tax purposes, the property can continue to be valued at its acquisition cost, and tax is only levied upon sale. This avoids unrealized gain tax and contributes to stabilizing cash flow.
Points to note:
Tax structure comparison with ETFs : While ETFs avoid double taxation through pass-through taxation, corporate cryptoasset investments are subject to a double tax structure in which shareholders are taxed again on dividends and capital gains after being taxed at the corporate level. This is one of the important differences with ETFs, which will be discussed in detail in Chapter 6.
Prior agreement with the auditing firm is important The most important issue in a cryptoasset audit is confirming its existence. In order to determine whether an audit allows for ex post and third-party verification of financial figures, it will affect the design of operations and systems. Close consultation with the auditing firm is required to reach a prior agreement that an audit is possible. Examples of practical audit issues are as follows:
Internal controls are also an important prerequisite for audits, and they must identify risks specific to cryptocurrencies and take appropriate operational measures. Internal controls must be formulated into company regulations at an appropriate level of granularity and then specifically documented using business flow and business descriptions. Unlike traditional financial assets, which have external, reliable storage and recording institutions, cryptocurrencies require the establishment of a strict management system:
It is important to establish a collaborative system with accountants and tax accountants who are knowledgeable about cryptocurrencies and to consult and check with them regularly.
Cryptoasset ETFs have not yet been approved in Japan, but we will summarize the impact on corporate strategies and market positions if they are approved in the future.
Although a Bitcoin ETF was approved in the United States in January 2024, the stock prices of existing DAT companies continue to maintain a premium, and it is believed that the two offer different value to investors and the market.
| Item | ETF | DAT company |
| Leverage | Basically, only physical holdings | Leverage possible through convertible bonds and new stock issuance |
| Investment strategy | Index-linked passive management | Discretionary adjustment of stock allocation, staking, etc. |
| Added value | Price tracking, low cost | Core business revenue and synergy with Web3 businesses |
| Tax structure | Pass-through taxation (taxed only on the investor side) | Corporate tax + investor tax (double taxation structure) |
Due to the current lack of ETFs in the Japanese market, DAT companies function as “de facto ETF substitutes,” and this unique market environment is one of the reasons for the stock price premium. Metaplanet’s official stance is that “ETFs are not competitors but a factor in expanding demand,” explaining that “while ETFs passively track Bitcoin, treasury companies can utilize capital markets to increase the amount of Bitcoin held per share.” (Reference: Metaplanet FAQ https://metaplanet.jp/jp/shareholders/faqs) While the premium has been maintained in the United States since the introduction of ETFs, the actual market reaction in Japan will depend on investor structure and market conditions, so it is unclear whether the results will be similar to those in the United States.
Corporate response strategies
Column: Investor Benefits of Investing in DAT Companies |
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For reference, we have compiled the main advantages and disadvantages that individual investors can gain by investing in DAT companies. Tax benefits (individual investors) Easy investment procedures Avoidance of institutional restrictions Major disadvantages and points to note As a result, DAT companies are in an environment where they can easily attract a certain amount of investor demand as “de facto cryptoasset ETFs,” but investment decisions require careful consideration. |
DAT strategies offer leverage benefits and synergies with corporate value that differ from ETFs and are establishing themselves as a unique investment target. With appropriate measures, they are a financial strategy that can be implemented under the current Japanese legal system.
Regarding legal issues, cryptoasset exchange registration is not required, they do not fall under collective investment schemes, and staking and lending are not subject to regulations if conducted on a proprietary account.
While accounting and tax issues arise, such as the direct impact of mark-to-market valuation on business performance and year-end mark-to-market taxation, certain issues can be addressed by utilizing the transfer restriction system under the 2024 tax reform.
However, for Japanese companies to sustainably implement DAT strategies, merely obtaining legal clearance is not enough. Gaining stakeholder understanding and trust through comprehensive accounting, tax, and investor relations systems, prior agreements with auditing firms, the establishment of appropriate risk management systems, and ongoing investor disclosure are key to success. As corporate involvement in cryptoassets is expected to continue to expand, we hope this article will be helpful in your strategic considerations.
We received advice on this blog from Kensuke Amano of Animoca Brands, Inc., and certified public accountants Yosuke Yuzuki and Ko Saito. However, all possible errors are the responsibility of the authors.
Disclaimer:
The contents of this document have not been confirmed by the relevant authorities and merely describe arguments that are reasonably considered legally. Furthermore, they represent the author’s current views and are subject to change.
This document does not recommend the use of DAT strategies or investment in DAT strategy companies.
This document has been compiled solely for this blog. If you require legal, accounting, or tax advice for your specific case, please consult your lawyer, accountant, or tax accountant.
In this article, we will introduce AI agents, which have been gaining popularity since 2025, by explaining (1) what an AI agent is, (2) what Web3 AI agents are, and (3) the legal issues surrounding AI agents.
Because AI agents can take over any job, when considering the relationship between AI agents and the law, it is necessary to consider legal issues for all the jobs they perform. However, since it is difficult to cover all of this in a blog, this article first introduces the basic ideas for considering legal issues related to AI agents, and then discusses their relationship with regulation, focusing on financial regulation in particular.
However, we believe that this approach to financial regulation will also be useful to a certain extent when considering legal issues related to other AI agents.
An AI agent is generally an artificial intelligence system that autonomously performs specific tasks. It is capable of processing data from the environment, learning and making decisions as needed, and carrying out tasks without human instruction.
Generally, an AI agent has the following elements:
| (i) Recognition: Processes the external environment and input data to understand the current situation. (ii) Decision-making: Plans actions to accomplish tasks based on data. (iii) Action: Executes actions that bring about changes in the environment based on the plan. (iv) Feedback: Uses the results of execution to learn and improve actions next time. |
This allows AI agents to perform repetitive tasks and make complex decisions on behalf of humans.
AI agents are currently attracting a great deal of attention as they are expected to transform our lives and how we do business.
For example, AI agents are expected to be used in the following applications:
| Examples of AI Agent Uses: (i) Generative AI Creativity Support: Used in creative fields, such as generating text, images, videos, and music. In the media, advertising, and gaming industries, AI is expected to improve production efficiency and create new value. (ii) Personal Assistant: AI can provide support tailored to individual needs, such as life coaching, educational support, and business assistants. Applications that improve daily life efficiency, such as schedule management and health advice, are gaining attention. (iii) Autonomous Use in Finance: AI agents that support asset management and household finances use data to propose optimal investment strategies and savings methods. Automated trading and asset management are also advancing in decentralized finance (DeFi). (iv) Business Process Automation: Automating repetitive tasks such as human resources, finance, and customer service contributes to improving corporate productivity. Data analysis and decision-making support are also areas where AI agents excel. (v) Healthcare: AI agents are used for health management, telemedicine, and disease prediction. In particular, personalized services such as symptom analysis and mental health support are expected. (vi) Autonomous Systems: AI agents are expected to play an active role in handling physical tasks such as robot automation in warehouse management, logistics, and disaster response, as well as self-driving and drone operation. |
AI agents have the potential to enrich our lives and make businesses more efficient, thanks to their personalization and autonomy, and these applications are areas where further advancements are expected in the future.
The following are some specific examples of AI agent use both in Japan and overseas.
| Service name | Provider | Features |
| Fujitsu Kozuchi AI Agent | Fujitsu Limited | An AI agent that autonomously promotes advanced tasks in cooperation with humans. For example, as a conference agent, AI can participate in meetings to share information and propose measures, or as a field support agent, analyze camera footage at manufacturing and logistics sites, propose improvements, and create work reports. |
| Agentforce | Salesforce, Inc | Autonomous AI assistants. For example, Service Agent, part of Agentforce, replaces traditional chatbots with autonomous AI, enabling accurate and fluent conversations with customers 24/7 without pre-programming scenarios. |
| Operator | OpenAI, Inc | AI operates a web browser on behalf of the user, automating everyday tasks. It uses its own browser to navigate web pages and perform operations such as typing, clicking, and scrolling according to the user’s instructions, allowing it to automate tasks such as making restaurant reservations and online shopping. |
| Pactum AI | Pactum AI, Inc. | Walmart has introduced Pactum AI, an autonomous negotiation AI, to automate negotiations with over 100,000 suppliers. It automatically makes proposals in response to requests from suppliers based on pre-specified budgets and priorities, leading to optimal trading terms for both Walmart and the supplier. |
| Waymo Foundation Model | Waymo LLC | Waymo, which operates self-driving taxis, uses a proprietary AI model called the Waymo Foundation Model to enable advanced decision-making, from understanding the surrounding situation to generating driving plans. |
AI agents are said to be compatible with Web3. The integration of Web3 and AI agents is expected to create new possibilities, such as the following:
| Examples of Web3 AI Agent Use Cases : (i) Integration with Decentralized AI Agents and Smart Contracts: AI agents operate smart contracts on the blockchain and execute transactions autonomously. For example, real estate and financial transactions can be completed without an intermediary. ・Operating as part of a Decentralized Autonomous Organization (DAO): AI agents participate in the decision-making process within the DAO, making proposals and voting. (ii)Strengthening User Sovereignty and Protecting Privacy: AI agents process user data locally and securely store personal information in decentralized storage (e.g., IPFS). ・Self-Sovereign Identity (SSI): AI agents leverage users’ SSI to simplify access and authentication to Web3 services. (iii) Automating the Token Economy and Automating Token Trading: AI agents manage and trade assets on behalf of users on a decentralized exchange (DEX). ・Reward Distribution: AI agents receive and redistribute tokens based on the value they generate on the Web3 platform. (iv) Metaverse and AI Agents: AI agents act as virtual assistants within the metaverse. For example, managing land for users or trading NFTs. (v) Utilizing Zero-Knowledge Proofs (ZKPs): AI agents can use ZKPs to provide trust in Web3 applications while protecting privacy. |
One example of a Web3 AI agent that has attracted global attention is AI16Z (ai16z), a decentralized AI investment fund built on the Solana blockchain that utilizes AI agents to autonomously conduct investment activities.
| Project name: ai16z Platform: Solana Blockchain Features: ・AI collects and analyzes market information and automatically executes token transactions taking into account community consensus. ・Uses decentralized governance that allows investors to participate in project management and decision-making through tokens. ・Blockchain technology ensures the transparency and reliability of investment activities. AI Agent “Eliza”: ・An AI agent responsible for planning and executing investment strategies. ・Released as open source, it can also be deployed by third parties. |
The name ai16z is a play on Andreessen Horowitz (a16z), a well-known Silicon Valley VC, but ai16z and a16z are unrelated.However, on October 27, 2024, Marc Andreessen, one of the founders of a16z, posted “GAUNTLET THROWN” on X (formerly Twitter) and mentioned the T-shirt worn by ai16z’s main avatar, which caused the name of ai16z to spread rapidly3.
Furthermore, in early January 2024, ai16z’s market capitalization temporarily exceeded 300 billion yen, growing more than 100 times in three months. As a result, by early January 2025, the company had become a hot topic worldwide and in the case of a personal injury accident was also a major topic of discussion on AI agents on Japan’s X (formerly Twitter).However, perhaps due to overly high expectations, the price has fallen sharply, with the market capitalization falling to around 50 billion yen, indicating extremely speculative price movements.
| 1 AI Agents and Legal Regulation (Basic Concept) (i) The word “agent” in AI agent translates to “proxy” in Japanese. Even if a service called an AI agent does not strictly qualify as an “agent” in the legal sense, it typically refers to an entity that performs specific tasks “on behalf of” a human. (ii) When considering regulations applicable to AI agents, we first consider (1) what regulations would be imposed if a human were to perform similar actions, (2) whether any regulations would be imposed on the user if the user were to perform such actions using AI, and (3) whether any regulations would be imposed on the business if the business provides the AI to users. (iii) Note that, in cases such as DAOs, if the AI agent can be said to operate completely autonomously and without human involvement, there is room to consider that legal regulations do not apply in the first place. However, since it is often unclear whether there are no operators who would be subject to regulation, careful consideration is required. 2 Relationships between AI Agents and Users, and Relationships between AI Agent Providers and Users (i) When a part of a task is delegated to a human, it can take the form of ① outsourcing (quasi-agency or subcontracting), ② labor dispatch, or ③ employment. However, when a part of a task is delegated to an AI agent, no contractual relationship arises between the AI agent and the user; the human is simply effectively using the AI agent. (ii) The relationship between an AI agent provider and its user is governed by contractual relationships, such as a service agreement (e.g., SaaS) or a system development agreement for the AI agent. 3 AI Agent Errors and Liability (i) Discussion of Holding Providers Liable The relationship between an AI agent provider and its user is governed by contracts and regulations. If an AI agent malfunctions, the service provider providing the AI agent may be held liable for breach of contract or other issues. (ii) Ordering Errors by an AI Agent (Unauthorized Orders or Unauthorized Agency) ①If an AI agent managed by a user places an incorrect order, the effects of the order generally belong to the user. Depending on the instructions given to the AI agent, its behavior, settings, and management status, there is theoretically room for consideration of canceling an order due to error. However, from the perspective of transaction security, such a claim would likely only be accepted in extremely limited cases. ②For AI agents managed by others, the issue is whether the AI agent provider acted without authorization. Regarding apparent agency, for example, if an AI agent is given a password or has order authority and transacts beyond that authority, the other party will have no choice but to consider the transaction legitimate, and apparent agency would essentially be established. ③For example, if an AI agent provided by a financial institution such as a cryptocurrency exchange or securities company malfunctions and places an erroneous order, a user may be able to sue the financial institution for damages or claim cancellation due to error. Therefore, although it would reduce convenience, taking measures such as requiring a human (user) to personally confirm the final order details would be effective in addressing the risk of erroneous orders. (iii) Liability for Damages Caused to Others through the Use of AI Agents For example, if damages are caused to others through the use of an autonomous driving AI agent, who is liable? ① The driver of an autonomous vehicle owned by the user may be liable for damages under the Automobile Liability Act or the Civil Code; ② The automobile manufacturer may be liable for damages under the Product Liability Act (PL Act); and ③ The software provider providing the AI agent may be liable for damages under the Civil Code. 4 Web3 AI Agents and Financial Regulation (i) If an AI agent trades cryptocurrencies or stablecoins on behalf of users on a DEX, it is necessary to consider whether regulations for cryptocurrency exchanges and electronic payment instruments trading businesses apply to the provider of the AI agent. While mere assistance to users is not subject to regulation, if the AI agent is deemed to act as an intermediary, it may become subject to regulation. (ii) Investment advisory and management services for spot trading of cryptocurrencies and stablecoins are currently not subject to regulation under the Financial Instruments and Exchange Act. Therefore, even if an AI agent is conducting such transactions, these regulations are generally not applicable. On the other hand, investment advisory and management services for cryptocurrency and stablecoin “derivative trading” are subject to regulation under the Financial Instruments and Exchange Act. Even when services are provided by AI agents, the provider may be subject to regulations under the Financial Instruments and Exchange Act. (iii) If a GK uses an AI agent to trade spot cryptocurrency or stablecoins when conducting fund management operations, such as in a GK-TK scheme, regulations under the Crypto Asset Exchange Business and Electronic Payment Instruments Business may not apply. On the other hand, if another company receives investment discretion from the GK and uses an AI agent to conduct such operations, regulations under the Crypto Asset Exchange Business and Electronic Payment Instruments Business may apply. 5 Other Laws (i) When an AI agent provides customer service, measures must be taken keeping in mind the warnings regarding AI issued by the Personal Information Protection Commission. In relation to Article 4 of the Consumer Protection Act, measures must be taken to prevent hallucination. |
The “agent” in AI agent is translated as “representative” in Japanese. Services called AI agents usually refer to entities that perform specific tasks “on behalf of” humans, even if they do not fall under the strict legal definition of a “representative.”
When considering regulations that may apply to AI agents, consider the following steps:
(i) Consider what legal issues would arise if a human were to perform a similar act.
(ii) Then, consider whether any regulations would be imposed on users if they were to perform such acts using AI.
(iii) Consider whether any regulations would be imposed on businesses that provide the AI to users.
As mentioned above, AI agents are sometimes translated as “agents,” but since they are neither people nor corporations, under current law, AI agents themselves are not subject to regulation. Instead, the natural persons and corporations that use or provide them are.
In relation to this “natural persons and corporations are subject to regulation,” particularly in the context of DAOs, if an AI agent can be said to operate completely autonomously and without human involvement, the question arises as to whether legal regulations would not apply in the first place. However, since it is often unclear whether there are no operators who are completely subject to regulation, we believe that careful consideration is necessary4.
Currently, there are no laws that generally prohibit the provision or use of AI agents, so whether or not the current regulations that apply to natural persons and legal entities apply to each individual act must be considered.
In relation to point 2 above, even if we translate “agent” as “representative,” AI is neither a natural person nor a legal entity, and AI itself cannot be the subject of rights or obligations.
Therefore, for example, when an AI agent makes a mistake, the AI itself is not liable, but the user or the AI agent provider is.
AI agents are automating a variety of tasks.
First, when a person delegates part of a task to another person, a contract of the following form is concluded.
| Relationships between people (i) Outsourcing (quasi-agency/subcontracting) ● Generally suitable when outsourcing short-term work. ● Contracting (Article 632 of the Civil Code) is used when a specific output or task is required to be completed, and quasi-agency (Article 656 of the same Code) is used when a specific task is required to be performed. ● Main relevant laws and regulations: Subcontracting Act, Antimonopoly Act, Freelance Act, etc. (ii) Worker dispatching ● Generally suitable when temporarily supplementing one’s own staff. ● Workers are employed by the dispatching company and perform work at the dispatched company. ● Main relevant laws and regulations: Worker Dispatch Act, etc. (iii) Employment (Article 623 of the same Code) ● Generally suitable when securing a stable workforce for ongoing work. ● Main relevant laws and regulations: Labor-related laws and regulations such as the Labor Standards Act. |
On the other hand, under current law, the relationship between humans (users) and AI agents is merely that between humans and the software and hardware (that construct the AI agent) and is not a contractual relationship; it is merely a relationship in which humans are effectively using the AI agent.
AI agents are generally developed by companies, and many users either receive ready-made AI agents from those companies or commission the development of AI agents to those companies.
This relationship can be summarized as follows:
| (i) Obtain a license to use the AI agent provided by a service provider such as a SaaS service provider and use it in compliance with the terms of use. (ii) Develop, install, and operate an AI agent system for your company. |
If a user suffers damage due to a malfunction of an AI agent, the following liability claims and defenses may be taken:
| The user’s argument: ・Based on the contents of the SLA (Service Level Agreement), etc., the user may seek compensation for damages (Article 415 of the Civil Code) or terminate the contract (Articles 541 and 542 of the Civil Code). The service provider’s possible arguments: ・There are exemptions and limitations on liability based on the terms of use; ・The service provider is not at fault (Article 415, Paragraph 1, of the same law); ・The user is also negligent (Contributory Negligence, Article 418 of the Civil Code). |
For example, if a person asks another person to purchase Bitcoin and gives them authority to do so, but the agent ends up purchasing Ethereum, this will be considered unauthorized agency, and in principle the effects of the contract will not belong to the principal.
The main legal issues that arise when unauthorized agency occurs are as follows:
| ● Ratification of unauthorized agency (Articles 113 and 116 of the Civil Code) ● Liability of unauthorized agent for performance or damages (Article 117 of the same Code) ● Application of apparent agency (Article 110 of the same Code) ➡ If the counterparty has “legitimate reasons” to believe that the principal has the authority of agency, the effects of the contract may belong to the principal. For example, if the agent has the means to prove the authority of agency (possession of a registered seal or power of attorney, etc.). However, in the following cases, if the counterparty does not conduct an appropriate investigation or confirmation of the existence of the authority of agency, it may be determined that there is no “legitimate reason” and the apparent agency may not be established. ✓ If there are signs of tampering with the power of attorney ✓ If the seal on the power of attorney is a cheap seal ✓ If the transaction is disadvantageous to the principal |
Since AI agents are programs that operate based on user instructions, orders placed by AI agents are generally considered to be an expression of the user’s intention, and the effects of such orders are also considered to belong to the user.
However, there are also cases where an AI agent places an order that differs from the user’s true intention, and in such cases, the question arises as to whether the effects of the order belong to the user.
In this regard, it may be necessary to consider whether the user can revoke the expression of intention as a “mistake” (Article 95 of the Civil Code). There are two cases of mistake:
| 1. Mistake resulting in a lack of intention corresponding to the manifestation of intention (Article 1, Paragraph 1, Item 1) In principle, rescission is possible if the mistake concerns an important matter. 2. Mistake resulting in an untrue understanding of the circumstances that formed the basis of the legal act (Article 1, Paragraph 2) In principle, rescission is possible only if the mistake concerns an important matter and the circumstances were disclosed to the other party. |
(a) When the user’s instructions and the order result match
For example, if a user intends to “purchase cryptocurrency at the discretion of an AI agent” and issues such instructions, resulting in the purchase of an unexpected type and quantity of cryptocurrency, since the user’s intention to “purchase cryptocurrency at the discretion of an AI agent” and the result match, it can be said that there is a user intention corresponding to the expression of intention (the AI agent’s order), and unless the other party is informed that “the user thought the AI agent would operate within the user’s expectations,” it is likely to be difficult to cancel the order due to mistake (paragraph 2 of the same article).
(b) When the user’s instructions and the order result do not match
On the other hand, if the user gives specific instructions specifying the type and quantity, and the AI agent places an order for a different type and quantity, it seems theoretically possible to argue that the cancellation was due to mistake, on the grounds that the user’s intention (the AI agent’s order) does not correspond to the expression of intention.
However, if such cancellations were easily permitted, it would likely seriously undermine the safety of transactions. Therefore, Article 95, Paragraph 3 of the Civil Code stipulates that cancellations cannot be made if the user is “grossly negligent.” For example, if there is a setting error or improper management of the AI agent, the user could be found to be “grossly negligent” and the cancellation could be denied. In the case of orders placed by a company, it may even be considered “gross negligence” if the user does not check the specific order contents themselves after using the AI agent.
(c) Special provisions for electronic consumer contracts
When consumers place orders using AI agents, Article 3 of the Electronic Consumer Contract Act (Act on Special Provisions of the Civil Code Concerning Electronic Consumer Contracts) is likely to apply. This Act, because of the high incidence of ordering errors in internet transactions, allows cancellation in the following cases in principle:
| ① Orders made by mistake (e.g., pressing the “Buy” button by mistake) ② Orders made by incorrect input (e.g., entering the wrong quantity) ③ Orders made differently from your intention due to automatic input or incorrect operation |
Even when using an AI agent, if a consumer conducts a transaction using a computer in accordance with the procedures displayed on a computer screen by a business operator, this will be considered an electronic consumer contract (Article 2, Paragraph 1 of the same Act), and it is considered that this article also applies to transactions using an AI agent.
However, this exception will not apply if a business takes measures to request confirmation of the consumer’s intention, as described below.
| ① When a final confirmation pop-up asking “Do you want to confirm your purchase?” is displayed. ② When a confirmation screen is set up via the cart instead of one-click purchasing. ③ When the intention to purchase is confirmed using a system such as two-factor authentication. |
Furthermore, if a consumer uses an AI agent to conduct a transaction without taking the necessary confirmation measures, this may fall under the provision of the same article, “where the consumer expresses their intention to the business operator that they do not need to take such measures,” and the special provisions may no longer apply. In such cases, cancellation due to mistake is generally not permitted.
If an AI agent provided by another party is used and the AI agent conducts a transaction that the user did not intend, the issue of unauthorized agency by the AI agent provider may arise. When
the AI agent provider is an unauthorized agent, the following particular issues arise regarding the success or failure of apparent agency.
| ●In a typical agency relationship, whether the agent has a registered seal or a power of attorney is the key to determining whether there is “reasonable cause” to believe in the existence of agency authority over the other party. ●In the case of AI agents, transactions are digitalized, and it is common for there to be no use of a registered seal or presentation of a power of attorney. |
Therefore, the question arises as to what constitutes a “legitimate reason” for the trading partner. If the AI agent is given, for example, a password or authority to place an order and uses it to place an order, the other party will basically have no choice but to believe that a legitimate transaction has been made, and it would appear that apparent agency would be established.
Column: Cases of erroneous orders made by AI agents provided by financial institutions such as cryptocurrency exchanges and securities companies and available within their services. |
|
1. When the counterparty is a third party. 2. When the counterparty is the financial institution itself. 3. Implementing User Confirmation as a Risk Avoidance Measure |
If another party suffers damages related to the malfunction of an AI agent, the provider of the AI agent or the user of the AI agent may be liable for damages.This point is particularly noteworthy as an example of the use of AI agents, and autonomous driving is a typical use case in which the use of AI agents could cause harm to others. In autonomous driving, an AI agent will be responsible for driving the car, but legal liability in the event of an accident may differ between when a human is driving and when an AI is driving.
In the event of a personal injury accident, the car owner or other operator (a person who operates a car for themselves) will be held liable under Article 3 of the Automobile Liability Insurance Act (Automobile Liability Insurance Act) in addition to tort (Article 709) of the Civil Code. When claiming damages under Article 3 of the Automobile Liability Insurance Act, the victim does not need to prove the driver’s negligence. Under Article 3 of the Automobile Liability Insurance Act, the operator can be exempt from liability if they meet all of the following three exemption requirements:
| (a) The driver and the victim were careful in operating the vehicle. (b) The victim or a third party other than the driver acted intentionally or negligently. (c) The vehicle had no structural defects or functional impairments. |
Since the Automobile Liability Act does not apply to property damage accidents, victims must file a claim for damages based on tort liability in Article 709 of the Civil Code. In this case, the victim must prove the driver’s intent or negligence.
Even if an accident resulting in injury or death occurs due to the autonomous driving of an AI agent, the Automobile Liability Act is generally considered to apply.5 If there is a malfunction in the system of a fully autonomous driving AI agent, the victim may be entitled to claim damages from the operator under the Automobile Liability Act, as it would not meet requirement (c) of the above exemption requirements.
We believe that operators who have paid compensation and insurance companies who have paid insurance claims due to system failures caused by AI agents will seek compensation from automobile manufacturers, AI system software providers, and others.
In the case of property damage accidents, Article 3 of the Automobile Liability Act does not apply, so claims for damages based on tort liability will be made against the driver, etc. However, with fully autonomous driving, there will be no driver error, etc., so it will be difficult to hold the driver responsible for intent or negligence, and it may be difficult to recognize the driver’s liability for damages.
In this case, if there is a problem with the AI agent system, the victim may seek liability from the automobile manufacturer or software developer that provides it, as follows:
Victims may file a claim for damages against the automobile manufacturer under Article 3 of the Product Liability Act (PL Act).
The PL Act imposes strict liability on manufacturers when a defect in a product causes damage to life, body, or property. However, there are also the following issues:
| ● Software itself is not movable property, so it does not fall under the category of “products” under the Product Liability Act. However, if a vehicle incorporating the software is deemed to have a defect, the automaker may be held liable under the Product Liability Act.6 ● Because AI-based self-driving systems are sophisticated and complex, it may be difficult for victims to prove a “defect” and a “causal relationship.”● Product liability is recognized based on defects that existed at the time of delivery by the manufacturer, etc., so if a defect occurs due to a software update performed remotely after the vehicle is delivered, product liability may not be recognized. |
Victims may seek compensation for damages against software companies that provide AI agents, citing defects in the AI agents. In this case, because software is an intangible object and therefore product liability does not apply, victims may pursue tort liability under Article 709 of the Civil Code.
In this case, the victim will need to prove the software developer’s intent or negligence, so the hurdle for claiming compensation is likely to be higher than in cases where damages are claimed under Article 3 of the Automobile Liability Act or Article 3 of the Product Liability Act.
In this section, we will consider how financial regulations apply to AI agents in Web3, following the ideas in Section III above. Although we will be examining this in the context of Web3, similar ideas also apply to financial AI agents, such as stock investment AI agents.
It is conceivable that AI agents will trade crypto assets and stablecoins on behalf of users on decentralized exchanges (DEXs). Utilizing such a system is expected to bring the following benefits:
| ● Fast trading through real-time market analysis ● Data-driven decision-making that is not influenced by human emotions |
On the other hand, when conducting such transactions, it is necessary to consider whether there are any regulations regarding crypto asset exchange businesses, etc.
When buying and selling cryptocurrencies and stablecoins (which are linked to the value of legal tender and redeemable at face value), it is necessary to consider the application of regulations regarding crypto asset exchange businesses (Article 2, Paragraph 15 of the Payment Services Act) and electronic payment instruments trading businesses (Article 2, Paragraph 10, Item 2 of the same Act).
Under the law, trading crypto assets as a mere investor does not constitute a “business” and is not subject to regulation. 7 On the other hand,
sales to the general public or acting as an agent for sales to the public are subject to regulation.
Even if an AI agent buys and sells cryptocurrencies or stablecoins on behalf of a user, there are no particular regulations for the user if the AI agent is used for the user’s own investment purposes.
Also, even if there is a company that provides an AI agent to place buy and sell orders, there are likely to be no regulations if the agent simply assists users with the administrative procedures for buying and selling.
On the other hand, AI agents could act as intermediaries, for example, to easily connect users to DEXs.8 and is deemed to be managed and operated by a party other than the user, the provider of the AI agent may be subject to regulations on crypto asset exchange businesses and electronic payment instrument trading businesses (intermediary regulations).
In the Web3 field, AI agents can develop investment strategies and provide investment advice and asset management services related to spot trading of crypto assets and stable coins, as well as derivative trading of crypto assets and stable coins.
In this section, we will explain the main legal issues that must be considered when AI agents provide such investment services, comparing them with when provided by humans.
When providing investment advisory and management services, different legal regulations apply.
Investment advisory services refer to the business of providing advice on investment decisions regarding securities and derivative transactions by entering into a contract (investment advisory contract) for providing investment advice and receiving compensation.
The key points of regulation are as follows:
| ●Registration as an investment advisory and agency business is required under the Financial Instruments and Exchange Act (Article 2, Paragraph 8, Item 11, Paragraph 3, Item 1, Articles 28 and 29 of the Financial Instruments and Exchange Act). However, advice provided free of charge is not subject to regulation. ●Advice regarding spot trading of crypto assets and stable coins is not subject to regulation. ●Advice regarding derivative trading of crypto assets and stable coins (which fall under electronic payment methods) is subject to regulation. ●It is necessary to be aware of whether the advice is for spot trading or derivative trading. |
Investment management services are primarily considered to be (a) businesses that invest capital contributions from fund holders primarily in securities and derivative transactions (fund management businesses), and (b) businesses that invest and manage securities and derivative transactions after being entrusted with the authority to make investment decisions and manage assets by customers (discretionary investment businesses).
Key points of the regulations are as follows:
| ●Registration as an investment management business is required (FIEA Article 2, Paragraph 8, Item 12 (b), Article 2, Paragraph 8, Item 15, Article 28, Paragraph 4, and Article 29). Even if the service is provided free of charge, it is subject to regulation if it constitutes a “business.” ●(a) With regard to fund management business, self-offering generally requires registration as a Type II Financial Instruments Business (FIEA Article 2, Paragraph 8, Item 7, and Article 28, Paragraph 2, Item 1). However, there are exceptions, such as Special Business for Qualified Institutional Investors, etc. (FIEA Article 63). ●(b) If customer assets are entrusted to custody through discretionary investment business, registration as a Type I Financial Instruments Business is also required (FIEA Article 28, Paragraphs 5 and 1, Item 5, Article 29, and Article 42-5). ●If the investment target is spot trading of crypto assets or stable coins (in the case of (a) fund management business, if the investment target is “primarily”), it does not constitute an investment management business. On the other hand, if the investment target is derivative trading of crypto assets or stable coins (which constitutes an electronic payment instrument), it is subject to regulation as an investment management business. ●GK-TK Scheme9, all investments made by anonymous partners belong to the assets of the GK (operator) (Article 536, Paragraph 1 of the Commercial Code), and the GK conducts business in its own name. Therefore, (a) if the GK buys and sells spot crypto assets based on its fund management business, it is generally considered to be a transaction for the purpose of self-investment and therefore does not require registration as a crypto asset exchange business.10 In the case where the investment target is a physical stablecoin, it is considered to be a parallel case and would not be considered an electronic payment instruments trading business. ●(b) In the case of a GK-TK scheme, etc., where a GK entrusts investment operations to another company and the other company also buys and sells crypto assets and stablecoins, there is a possibility that it will be subject to regulations for crypto asset exchange businesses and electronic payment instruments trading businesses.11 |
When an AI agent provides investment advisory or management services, the question arises as to whether that business is subject to financial regulations. Generally, it is thought that the application of regulations to those who provide AI agents will be considered.
The key points of regulation are generally the same as when a human does the work, but the following points are particularly important in the case of AI agents.
| ●Even when holding customer funds for discretionary investment management, there is a possibility that registration as a Type I Financial Instruments Business may not be required if the customer funds are held in a smart contract that is not operated by the AI agent provider. ● After the AI agent is provided, it may not be subject to regulation, especially if the AI agent operates completely autonomously as a DAO, without the developer being involved in its operation, and investment management is automatically executed by smart contract. |
AI agents could potentially act as virtual assistants, assisting with sales and answering inquiries. For example, when selling products or services within the metaverse, avatars equipped with AI agents could be expected to automatically provide customer service.
In this section, we will discuss the main legal issues surrounding AI agents providing customer service, comparing them with traditional human services.
When humans handle customer interactions, they must comply with laws and regulations, for example, from the following perspectives:
(a) Handling of personal information
When acquiring and using personal information when dealing with customers, you must comply with the following rules of the Personal Information Protection Act.
| ● Specify the purpose of use as clearly as possible (Article 17, Paragraph 1 of the Personal Information Protection Act) ● Do not use personal information beyond the scope of the specified purpose (Article 18, Paragraph 1 of the same Act) ● Notify or publicize the purpose of use to the individual (Article 21, Paragraph 1 of the same Act) |
(b) Consumer protection regulations
When explaining services or providing information to consumers, you must comply with the following regulations based on Article 4 of the Consumer Contract Act.
| ●Do not give false explanations about important matters. ●Do not provide definitive judgments about uncertain future matters. ●Avoid intentionally or through gross negligence withholding facts that are detrimental to consumers. |
In the event of any of these breaches, the consumer has the right to cancel the contract, so it is important to provide accurate and sufficient information.
(a) Handling of personal information
Even when AI agents deal with customers, they must handle personal information with care.
The Personal Information Protection Commission has issued a warning to OpenAI service providers, including that they must “notify or publicly announce, in Japanese, the purpose of use of personal information of users and other individuals,” and that they must not acquire sensitive personal information without the consent of the individual.12 In addition, the government has issued a warning to businesses that use generative AI to handle personal information, stating that “when a business handling personal information inputs prompts containing personal information into a generative AI service, it must fully confirm that the input is within the scope necessary to achieve the specified purpose of use of the personal information.”13
When handling personal information using AI agents, it is necessary to keep these precautions in mind.
(b)Hallucination by AI agents
From the perspective of complying with Article 4 of the Consumer Contract Act, etc., there is a risk of “hallucination,” where an AI agent provides insufficient information or gives incorrect answers based on insufficient training data or outdated information.
The following measures can be considered to prevent this problem.
| ● Continuously train the AI agent using the latest and most accurate learning data. ● Implement a feedback function that allows consumers to report misinformation. ● Operators should check the AI agent’s responses as appropriate and make corrections as necessary. |
Reservations:
As the price of cryptocurrencies rises, Bitcoin has established itself as “digital gold.”
Bitcoin and stablecoins are rapidly becoming popular for everyday payments, particularly in South America and Africa, where financial infrastructure is insufficient. For example, in El Salvador, Bitcoin has been adopted as legal tender and is also used for tax payments and person-to-person remittances. Even in the developed United States, an increasing number of companies are adopting crypto payments for online shopping and subscription services.
Meanwhile, in Japan, while Bic Camera’s introduction of Bitcoin payments in 2017 made headlines, the spread of crypto payments since then appears to have been limited. The main reasons for this are that profits are finalized at the time of crypto payment, and individuals are subject to tax of up to 55%, as well as the hassle of recording small payments and filing tax returns. However, if stablecoins, which have fewer price fluctuations, become more widespread, crypto payments may also become more widespread in Japan.
*This article is a revised version of “Crypto Payments and Japanese Law,” published by the author on January 30, 2025.
This article explains how crypto payments work and discusses legal issues surrounding their introduction in Japan.
While “crypto payments” in this article refers to a broad concept that includes crypto asset payments and stablecoin payments, the legal discussion will primarily focus on cryptoassets. Regulations regarding the trading and management of stablecoins are generally like those for cryptoassets, so please refer to them accordingly.
Examples of Crypto payments can be broadly divided into two categories. One is where Crypto is used for direct payments, and the other is where credit cards or debit cards are used. Below are some examples of these payments being made overseas.
Credit card10/Debit card type
Debit card type
Prepaid card type
| Cryptocurrency Law and Fund Settlement Law Cryptocurrency Regulations |
Installment Payment Act , Money Lending Business Law, Regulations on Prepaid Payment Instruments | Foreign Exchange Act | |
| Accepting Crypto payments at company stores | none | none | Foreign Exchange Act reporting is required for transactions of 30 million yen or more with non-residents or overseas entities. |
| Crypto payments using payment processors | Possibility of applying trading regulations to payment processing companies | none | Same as above |
| Credit card type | Applicability of storage and trading regulations | Applicability of the Installment Payment Act (Shopping) and the Money Lending Business Act (Cashing) | Same as above |
| Debit card type | Applicability of storage and trading regulations | none | Same as above |
| Prepaid card type | none | Application of prepaid payment instrument regulations as a self-operated or third-party type | Same as above |
This article explains the regulations for accepting cryptocurrency payments at your physical or online store.
In Japan, the buying and selling of cryptocurrencies, as well as their intermediation and management for others, are regulated as cryptocurrency exchange businesses. However, there are no regulations regarding accepting cryptocurrency payments at your store. There are also no regulations regarding holding received cryptocurrency in-house or exchanging it for cash using a cryptocurrency exchange.
However, in principle, any settlement of 30 million yen or more between non-residents or overseas accounts will trigger a reporting obligation under the Foreign Exchange and Foreign Trade Act (Article 55 of the Foreign Exchange and Foreign Trade Act). This reporting obligation also applies to settlements of 30-million-yen worth of cryptocurrency, and reporting by residents is required. This reporting obligation also applies to settlements described in section 3 and thereafter.
Some Japanese companies are reluctant to own or manage cryptoassets in-house. This is due to a number of factors, including price fluctuation risks, security risks such as hacking, and accounting and tax issues. Such companies sometimes use a third-party payment agent (hereinafter referred to as “payment agent”) to receive cryptoassets, convert them to Japanese yen, and hand them over to stores and other companies.
This scheme is a combination of the following actions:
1) Receiving cryptocurrency for someone else.
2) Converting the received cryptocurrency into Japanese yen for someone else.
3) Handing over the converted Japanese yen to the company.
However, the act of “(2)-converting cryptoassets into Japanese yen” is considered to be a cryptoasset exchange business for payment agents, and in principle, it is thought that they will need to be registered as a crypto asset exchange business. In this regard, a comparison with the collection agency services provided by convenience stores and courier companies in Japan, which are carried out without any particular regulations, becomes problematic. Is it possible to consider that the activities performed by payment agents are also collection agencies and therefore should not be regulated, or is it possible to summarize them as follows?
1) The store grants the payment agent the authority to collect the cryptocurrency.
2) The payment agent receives the cryptocurrency as its own.
3) The payment agent hands over Japanese yen as part of the processing of the delegated business.
4) This is not a conversion act, but merely a payment method for processing the delegated business.
While this approach may be possible in theory, in my experience, it is likely that discussions with authorities will be tough in actual practice. Therefore, it is safe to assume that in practice, registration of a cryptocurrency exchange business will likely be required. However, if the business is conducted in conjunction with other business or delegated duties, it may be permitted depending on the specific content. This point requires careful consideration on a case-by-case basis.
A typical example of a credit card-type crypto payment would look something like this:14
1) A cryptocurrency exchange or its affiliated company issues a credit card.
2) The user purchases goods in yen or dollars.
3) Unlike a regular credit card, payment is made in the form of Bitcoin or other currency deducted from the user’s cryptocurrency exchange account.
In Japan, when issuing a credit card that includes features such as “installment payments over two months,” “revolving payments,” or “bonus lump-sum payments,” this constitutes “credit purchase intermediation” and requires registration as a credit purchase intermediary under the Installment Sales Act (Article 31). Once registered, various regulations under the Act apply, including the obligation to provide information to customers, the obligation to prevent excessive credit, and restrictions on the severance of defenses.
On the other hand, cards that only allow payment methods of “one-time payments within two months (so-called monthly clear)” do not constitute credit purchase intermediation and do not require registration as a credit purchase intermediary. However, since this type of card falls under “two-month installment purchase intermediation” (Article 35-16, Paragraph 2 of the Installment Sales Act), it is subject to the obligation to implement appropriate management measures for card numbers, etc. (Article 35-16, Paragraph 1).
The above regulations also apply to credit cards linked to cryptocurrencies, depending on the features provided.
The cash advance function of a credit card is a borrowing rather than a purchase of goods or services, so it is subject to regulation under the Money Lending Business Act, not the Installment Sales Act.
Even if the credit card is linked to cryptoassets, if cash advances can be made in yen or foreign currency, money lending applies. However, if cryptocurrency can be used for cash advances, it is not subject to regulation as the Money Lending Business Act does not apply to cryptocurrency lending in principle (see definition in Article 2 of the Money Lending Business Act).
(i) Regulations on Custody Activities
In the case of credit cards linked to cryptocurrencies, if the issuer directly stores users’ cryptocurrencies, they are subject to regulation as a custodian under the Payment Services Act (Article 2, Paragraph 7).
However, the following cases may not constitute custody and may be exempt from regulation:
(ii) Regulations on Trading Activities
Converting cryptocurrencies into fiat currency during card payments constitutes the sale of cryptocurrencies and generally requires registration as a cryptocurrency exchange business. Typical examples are:
(a) A user purchases a product with a credit card.
(b) A user sells cryptocurrencies equivalent to the purchase price from their account, and the proceeds (e.g., yen) are paid to the card issuer. These cases constitute the sale of cryptocurrencies (or their intermediation).
Cryptocurrency Payment Schemes
On the other hand, if a card issuer typically bills in yen and allows users to choose to “deposit cryptocurrency in lieu of yen” by the due date, this can be considered a type of payment method designation and, in some cases, may be considered merely a substitute payment, not a sale. In this case, registration as a cryptocurrency exchange business is not required.
However, the Installment Sales Act imposes restrictions on the display of payment methods and calculation methods, and how to address these restrictions presents a challenge. Furthermore, there are likely many practical challenges, such as accounting and tax procedures when card issuers accept cryptocurrency, and how to handle cases where cryptocurrency prices fluctuate in the event of a chargeback.
As a supplement to the Act on Prevention of Transfer of Criminal Proceeds, comprehensive credit purchasing intermediaries, credit card number handling contract operators, cryptocurrency exchange operators, banks, and money transfer operators are considered specified businesses under the Act on Prevention of Transfer of Criminal Proceeds and are subject to AML/CFT regulations, including KYC requirements. In addition, acquirers (contractors that enter into contracts with credit card numbers, etc.) are required to investigate affiliated stores, which serves as an anti-money laundering measure.
A typical example of a debit card-type crypto payment works as follows:
1) A cryptocurrency exchange or its affiliated company issues a debit card.
2) The user deposits Bitcoin or other cryptocurrency with the cryptocurrency exchange.
3) The user can purchase goods in yen or dollars within the amount of the deposited cryptocurrency.
4) When purchasing goods, Bitcoin is automatically converted into yen.
In Japan, debit cards are not subject to the Installment Sales Act because they are instant payments. However, if a system is established in which users deposit funds and use them for card payments, a banking license or registered funds transfer business is required to accept that money. Because funds are transferred at the user’s instruction, they have the characteristics of a foreign exchange transaction, and from this perspective, a banking license or registered funds transfer business is also required.
On the other hand, the Banking Act does not apply to the issuance of debit cards linked to cryptocurrencies, which may raise the following issues:
While the Banking Act does not apply to debit cards linked to cryptocurrencies, the following issues arise:
– Managing other people’s cryptocurrencies as a business requires registration as a cryptocurrency exchange business.
– Selling cryptocurrencies at the time of payment and using the proceeds to pay constitutes the sale of cryptocurrencies and requires registration as an exchange business.
– If the card company bills in yen and the user deposits cryptocurrencies as a substitute payment, it does not constitute an exchange business.
A prepaid payment instrument is a system where you pay in advance, such as a book voucher, Apple gift card, or Amazon gift card, and are given a balance according to that amount, which can then be used to make payments.
The process for prepaid crypto payments is as follows:
1) The issuing company issues a prepaid card.
2) The user sends Bitcoin etc. to the issuing company.
3) The Bitcoin sent is charged according to its current value. For example, 0.001 BTC is equivalent to 15,000 yen.
4) When the user uses the card, the amount is deducted from the charged balance.
Prepaid payment instruments issued in Japan are divided into “in-house” and “third-party” types.
In the case of a self-owned type, notification is required, and in the case of a third-party type, registration is required, and in both cases, restrictions such as depositing half of the unused balance are imposed.
However, the regulations do not apply in the following cases:
Unlike credit cards and debit cards, prepaid cards are generally not subject to regulations governing cryptocurrency exchange businesses. The reasons for this are as follows:
1) The issuing company does not store cryptocurrency.
2) When a card is charged, a charge is made according to the amount of cryptocurrency, but this is not an exchange of money for cryptocurrency. It is merely the act of issuing a prepaid payment instrument.
3) It does not constitute an exchange between cryptocurrencies. However, if the scheme allows the charged cryptocurrency to be converted back into cryptocurrency (refund), it will essentially be considered a deposit of cryptocurrency, and custody regulations for cryptocurrency exchange businesses may apply.
With cryptocurrency payments, profits are considered confirmed at the time of settlement, and tax is levied on these profits. For example, if you acquire cryptocurrency for 10,000 yen and it increases in value to 50,000 yen, and you use that cryptocurrency to make a settlement, you will have a profit of 40,000 yen. For individuals, this profit is classified as “miscellaneous income” and is subject to comprehensive taxation, with a maximum tax rate of 55% being applied when combined with other income.
Crypto payments are subject to tax as described above, and as a general rule, require filing a tax return. Those with miscellaneous income of ¥200,000 or less who are salaried workers without a single source of income are not required to file a tax return.
However, those with miscellaneous income exceeding ¥200,000, or those with miscellaneous income of ¥200,000 or less who are self-employed, freelance, or have a side job and are required to file a tax return, must also report their crypto payment profits down to the last yen. For example, if you use cryptocurrencies for everyday purchases, you are required to record the market value of your cryptocurrencies at the time of each transaction and add up the profits to report. This recording and calculation process is extremely cumbersome, and can be a significant practical burden, especially when making frequent small payments.
This issue also applies if you later use leftover foreign currency from an overseas trip. For example, if you acquire $10 when the exchange rate is 120 yen to the dollar and then spend it on a trip abroad a few years later when the exchange rate is 150 yen to the dollar, the difference (30 yen x 10 dollars = 300 yen) will be taxed as miscellaneous income, and you may be required to file a tax return.
Some countries do not impose capital gains taxes on cryptoassets. Others exempt certain transactions from taxation, such as those involving small amounts or long-term holdings.
(Tax systems by country = researched via Chat GPT, etc.)
| 1 | Countries with no capital gains tax on individual cryptocurrency transactions | Singapore, Portugal, Switzerland, Malaysia, UAE, El Salvador |
| 2 | Countries that do not tax capital gains on long-term holding by individual | Germany (tax exempt if held for more than one year) |
| 3 | Countries with no capital gains tax within certain limits | UK (up to 6,000 GBP per year = approximately 1.2 million JPY), Italy (up to 2,000 EUR per year = approximately 320,000 JPY), South Korea (up to 25 million KRW per year = approximately 2.5 million JPY), Brazil (up to 35,000 BRL per month = approximately 900,000 JPY) |
| 4 | Countries that do not tax small payments | Australia (tax exempt if a single transaction is deemed to be a “Personal Use Asset” of 10,000 Australian dollars (approximately 900,000 yen) or less) |
| 5 | Countries currently discussing tax exemptions for small payments | United States (Currently, taxes are levied separately for short-term holdings and long-term holdings of over one year. Discussions are underway to exempt small profit settlements up to $200 per transaction from taxation.) |
| 6 | Countries where even small payments are generally taxed | Japan (however, miscellaneous income up to 200,000 yen is exempt from tax for those who are not required to file a tax return), France, Canada, Argentina |
Discussions on exempting capital gains from taxation on cryptoassets in Japan are likely to be extremely difficult. Furthermore, within the G7, it may be challenging for Japan to persuasively request authorities to exempt small-value payments from taxation, given that the US, France, and Canada currently impose taxes.
However, as countries advance Web3 development, particularly if the US succeeds in exempting small-value payments from taxation, Japan may need to introduce a system that does not tax profits from small-value payments for competitive policy reasons.
When issuing cryptocurrency-linked cards, they often enter into a contract with an international brand (such as VISA, MasterCard, Amex, JCB, or Diners) and use their payment network. Since international brands are required to comply with regulations in their respective countries, they typically conduct the following types of screening with the card issuer:
Additionally, instead of contracting directly with international brands, cards can be issued as co-branded cards through Japanese credit card companies that already have strong relationships with these brands. While this approach may simplify parts of the card issuance process, it’s important to note that certain regulatory compliance requirements and costs still apply.
Crypto payments are not particularly popular in Japan. The biggest factors are thought to be taxation of up to 55% and the complicated process of recording and reporting small payments.
If stablecoins become more widespread, the risk of price fluctuations will be reduced and a certain degree of solution is expected, but the extent of their adoption is still unknown. Additionally, the development of systems such as user protection and AML compliance remains an issue.
Looking ahead, improvements in the tax treatment of crypto payments are anticipated, particularly from the perspective of international competition in the Web3 sector.
Disclaimer:
The content herein has not been reviewed by relevant authorities and merely reflects discussions considered reasonable under applicable laws and regulations. It also represents only the author’s current views, which are subject to change.
This document does not endorse the use of crypto payments.
This article is merely a summary for blog purposes. For specific legal advice on individual cases, please consult an attorney.