The PSA regulates cryptographic assets ("cryptoassets") in Japan (Article 2-5 of the PSA). To the extent that NFTs meet the definition of cryptoassets under the PSA, they are subject to regulation under the PSA in Japan accordingly. Under the PSA, cryptoassets are defined in one of two categories: Item 1 cryptoassets, and Item 2 cryptoassets. Item 1 cryptoassets are those that meet all of the requirements of (a) to (c) below. Item 2 cryptoassets meet the requirements of (b) and (c) below. Cryptoassets are those that:
- can be used as payment for goods and services provided to an unspecified person and can be purchased and sold to and from an unspecified person;
- have an electronically recorded property value that can be transferred using an electronic data processing system; and
- cannot be denominated in Japanese currency, foreign currency or currency-denominated assets.
If NFTs fall under the category of cryptoassets as set out above, a person who buys, sells or exchanges them, or manages cryptoassets for others as a business is required to register as a cryptoasset exchanger (Article 63-2 of the PSA).
To the extent that NFTs are considered a security, FIEA provisions would apply. The FIEA covers shares, bonds, and fund interests in tokens or cryptoassets. NFTs are not currently listed as a security under the FIEA but if a certain NFT involved profit sharing, this could change its classification to be a security. The FIEA does not directly regulate the sale of various cryptocurrencies that utilize the blockchain. However, it does regulate derivatives of cryptoassets that are traded on various security exchanges such as funds that are tied to cryptocurrencies or cryptoassets.
In addition, we note that cryptocurrencies can be, and regularly are, used to purchase NFTs from online NFT marketplaces in Japan.