（Original Video in Japanese was published on the FINOLAB CHANNEL on Mar. 25, 2025）

Evolution of the Payment Services Act

Before diving into the details of the latest amendment, let’s take a quick look at the evolution of the Payment Services Act since its enactment in 2009:

• 2009: A new category called “funds transfer business” was introduced, allowing non-banking entities to engage in remittance services.
  
• 2016: With the rise of Bitcoin and other virtual currencies, a registration system for cryptocurrency exchanges was introduced.
  
• 2019: The term “virtual currency” was changed to “crypto assets,” and regulations on exchanges were tightened. To protect users’ assets, offline (cold storage) management became mandatory.
  
• 2022: Regulations were introduced to accommodate stablecoins as a payment method. The transfer limit for funds transfer businesses was raised, and a three-tier licensing system (Type 1, Type 2, and Type 3) was established.
  

These amendments reflect the industry’s response to technological advancements and emerging use cases.

Key Points of the 2025 Payment Services Act Amendment

The main aspects of the amendment, which was approved by the Cabinet in March 2025, include the following:

1. Introduction of Domestic Asset Retention Orders for Crypto Asset Exchanges

Previously, there was concern that crypto asset exchanges handling spot transactions could transfer their assets overseas. The amendment allows the government to issue asset retention orders to prevent such outflows.

2. Flexible Management Requirements for Trust-Based Stablecoin Reserves

Previously, stablecoin issuers were required to hold reserves in full as demand deposits. The amendment allows issuers to hold up to 50% of their reserves in low-risk assets such as government bonds or redeemable term deposits. This change is expected to enhance the international competitiveness of stablecoins issued in Japan.

Although no registration was permitted  for stablecnin operator after the new regulation in 2022, SBI VC Trade, part of the SBI Group, has become the first company in Japan to register for handling stablecoins. It plans to offer USDC, issued by Circle.

3. Establishment of a Brokerage Category for Crypto Asset Transactions

Until now, entities engaging only in mediating crypto asset transactions were required to register as full-fledged exchanges, creating high entry barriers. The amendment introduces a new brokerage category, allowing intermediaries to operate under a separate, more appropriate regulatory framework. This change aligns with financial regulations in other sectors and is expected to promote new service providers.

4. Regulation of Cross-Border Payment Collection Services

Recent regulatory changes now impose rules on cross-border payment collection services, which were previously unregulated. While these services do not require a funds transfer business license under the current framework, some have been misused for illegal activities such as online gambling and investment fraud. To address these risks, new regulations have been introduced.

• The new rules aim to crack down on unregistered operators involved in illegal fund transfers. For services with higher risks, additional regulations will enhance consumer protection and strengthen anti-money laundering (AML) measures.
• Cross-border payment collection services that do not directly facilitate product or service transactions will now be subject to funds transfer regulations. However, low-risk services—such as platforms directly involved in transactions or escrow services—may be exempt if they are already regulated under other laws.

Some industry groups, including the Japan Association of New Economy, have raised concerns that excessive regulation could harm digital payment services. They urge policymakers to ensure that the new rules are focused on actual risks and do not disrupt existing ecosystems like e-payments and point-based settlements. As the final details of these regulations take shape, it will be important to monitor their impact on businesses and innovation.

5. Faster Refund Process for Users in the Event of a Funds Transfer Business Failure

Previously, even when funds transfer businesses secured user assets through bank guarantees or trusts, refunds were processed through a government-led procedure, taking at least 170 days. The recent amendment introduces direct refund options, allowing banks and trust companies to return funds to users without going through the traditional process. This change enhances consumer protection and ensures faster access to funds in the event of a business failure, improving the overall efficiency of financial services.

Future Outlook

The 2025 amendment is expected to:

• Reduce the burden on stablecoin issuers, promoting stablecoin adoption in Japan.
  
• Lower barriers to entry for crypto asset intermediaries, expanding financial business opportunities.
  
• Introduce new regulations for cross-border collection services, with ongoing discussions on implementation details.
  

As the regulatory framework continues to evolve, stakeholders will be closely watching the government’s next steps, including specific regulations under ministerial ordinances.