Tag: japan

［Summary］AI Threats and the Future of Financial System Resilience

FINOLAB COLUMN, RESEARCH

［Summary］AI Threats and the Future of Financial System Resilience

Original article in Japanese by Makoto Shibata was published for FinTech Journal on May. 26, 2026）　https://www.sbbit.jp/article/fj/185412

The emergence of frontier artificial intelligence (AI) systems capable of identifying and exploiting software vulnerabilities has triggered significant concern within the global financial sector. In particular, the pre-release AI model “Claude Mythos” demonstrated an unprecedented ability to discover vulnerabilities in major operating systems and web browsers, leading regulators and financial institutions in both the United States and Japan to reassess their cybersecurity strategies.

The fundamental impact of frontier AI is not simply that it accelerates vulnerability discovery. More importantly, it can automatically generate exploit code and conduct attacks at machine speed. This dramatically shortens the cyberattack cycle and increases the likelihood of large-scale zero-day attacks. As a result, traditional security approaches based on preventing intrusions and applying periodic patches are becoming insufficient.

The report argues that financial institutions must shift their focus from strengthening defenses to strengthening their ability to detect, respond to, and rapidly repair vulnerabilities. This represents a significant change in operational philosophy. Instead of assuming systems can be fully protected, organizations must assume vulnerabilities will inevitably be discovered and exploited.

Another important implication is the growing limitation of the long-standing objective of uninterrupted system operation. Financial institutions have traditionally pursued 24/7 availability, real-time processing, and non-stop services. However, in an AI-driven threat environment, the ability to safely suspend operations, isolate affected systems, and recover quickly may become more important than maintaining continuous availability at all costs.

The report also highlights risks associated with legacy systems and closed networks. Many Japanese financial institutions continue to rely on aging mainframe-based infrastructures built with legacy programming languages such as COBOL. While these systems have historically provided stability and reliability, frontier AI may be particularly effective at analyzing complex architectures, uncovering hidden vulnerabilities, and identifying attack paths. Consequently, system complexity and age may become liabilities rather than strengths.

Japan’s highly centralized financial infrastructure presents additional challenges. Critical platforms such as payment networks and shared banking systems create efficiency but also introduce concentration risk. A successful AI-enabled attack against these common infrastructures could disrupt large portions of the financial system simultaneously and generate systemic consequences extending beyond individual institutions.

The report further warns that regional banks and smaller financial institutions may face greater difficulties because of limited cybersecurity expertise, aging systems, dependence on vendors, and shared service platforms. Japan’s multi-layered outsourcing structure within financial IT may also delay vulnerability management and obscure accountability.

To address these challenges, several priorities are identified. Financial institutions should adopt integrated DevSecOps practices, strengthen identity and access management, conduct realistic cyber exercises, improve IT governance, and establish robust AI governance frameworks. Investment in human resources is equally important, particularly professionals who possess expertise across finance, AI, and cybersecurity.

Finally, the report emphasizes the importance of public-private cooperation, international information sharing, and supply-chain security. Since AI-driven cyber threats transcend organizational and national boundaries, effective responses will require collaboration among governments, financial institutions, technology providers, and AI developers.

In conclusion, the rise of frontier AI represents more than a cybersecurity challenge. It requires a fundamental transformation of financial system operations—from a culture focused on uninterrupted service to one centered on resilience, rapid recovery, and adaptive risk management in the AI era.

［Summary］ Transformation of Cybercrime

FINOLAB COLUMN, RESEARCH

［Summary］ Transformation of Cybercrime

（Original article in Japanese by Makoto Shibata was published for FinTech Journal on May. 11, 2026）　https://www.sbbit.jp/article/fj/184958

The article examines how cybercrime is evolving based on the FBI’s latest Internet Crime Report and discusses the implications for Japan’s financial sector. It argues that cybercrime is no longer primarily a technology problem, but increasingly a challenge of financial system design and customer behavior.

FBI Internet Crime Report 2025: https://www.ic3.gov/AnnualReport/Reports/2025_IC3Report.pdf

According to the FBI’s 2025 report, more than one million cybercrime complaints were submitted in the United States, with total reported losses reaching approximately US$21 billion, a 26% increase from the previous year. Cryptocurrency-related crimes accounted for the largest share of losses, exceeding US$11 billion. The report also introduced a dedicated section on artificial intelligence (AI) for the first time, highlighting nearly US$900 million in damages linked to AI-enabled fraud. Criminals are increasingly using AI to generate phishing messages, impersonate executives, and steal credentials.

A notable trend is the shift from traditional “system intrusion” attacks to social engineering. Investment scams, business email compromise (BEC), technical support fraud, romance scams, and identity theft now account for the majority of financial losses. Rather than hacking financial institutions directly, criminals manipulate victims through social media, messaging platforms, and other communication channels, convincing them to initiate legitimate-looking transactions themselves. The article notes that approximately 85% of reported losses are linked to such social engineering schemes.

The author argues that Japan is already experiencing the same structural transformation. SNS-based investment fraud, romance scams, and other forms of deception have caused substantial losses, demonstrating that cybercrime increasingly targets human decision-making rather than technical vulnerabilities. As a result, financial institutions must expand their focus beyond cybersecurity to include monitoring customer behavior and transaction intent. The article introduces the concept of “Know Your Purpose,” suggesting that institutions should assess the legitimacy and context of transactions, not merely verify customer identity.

Another key issue is the growing complexity of money flows. Criminals often move funds across multiple layers, including bank transfers, money transfer operators, and cryptocurrency exchanges. The report warns that as Japan develops a regulatory framework for stablecoins and digital assets, similar risks may become embedded within the financial system. Effective countermeasures will therefore require cooperation across banking, payments, and cryptocurrency sectors rather than institution-by-institution responses.

The article also highlights the importance of combating fraudulent account creation and account trafficking. Stronger identity verification through technologies such as My Number card IC-chip authentication, combined with industry-wide sharing of suspicious account information, could significantly disrupt criminal networks. Likewise, in an era of instant payments, the ability to detect and freeze suspicious transactions in real time becomes as important as payment speed itself.

Finally, the article emphasizes the dual role of AI. While AI enables more sophisticated fraud, it can also be used to enhance behavioral analytics and anomaly detection. The discussion references concerns surrounding advanced AI models such as Anthropic’s Claude Mythos, which reportedly demonstrated the ability to identify and exploit software vulnerabilities, highlighting the growing cyber risks associated with rapid AI development.

The article concludes that Japan’s financial industry should prioritize three actions: implementing customer-behavior-based risk management, strengthening real-time data sharing across the industry, and building infrastructure capable of immediately delaying, suspending, or freezing suspicious transactions. The ultimate challenge is to create a financial system that balances convenience with security and positions financial institutions as critical social infrastructure for preventing fraud.

[Summary] QR Payments Across Asia: Standardization and Cross-Border Connectivity | FinTech Topics #129

FinTech Topics

[Summary] QR Payments Across Asia: Standardization and Cross-Border Connectivity | FinTech Topics #129

（Original Video in Japanese was published on the FINOLAB CHANNEL on June. 23, 2026 by Makoto Shibata）　https://youtu.be/vANj5aDSK5c

QR-code payments have become one of the most important innovations in Asia’s digital payment landscape. Although QR codes were originally invented in Japan, their large-scale adoption for consumer payments began in China and has since spread throughout Asia. Today, QR payments are transforming how people make purchases, transfer money, and conduct cross-border transactions.

China played a pioneering role through the rapid growth of Alipay and WeChat Pay. Supported by the widespread adoption of smartphones, these services evolved into “super apps” that integrate payments with messaging, e-commerce, transportation, and many other daily activities. Together they dominate China’s mobile payment market and have expanded their usability across many Asian countries.

Other Asian countries have followed different paths but share a common trend: government-led development of real-time payment infrastructure linked to QR-code technology.

India’s Unified Payments Interface (UPI), introduced in 2016, is one of the most successful examples. UPI enables instant transfers and payments through mobile applications, phone numbers, and QR codes. It has become the dominant payment infrastructure in India and is often cited as one of the world’s largest real-time payment systems.

Singapore introduced PayNow for instant payments and later launched SGQR, a unified QR standard that allows multiple payment providers to be accepted through a single QR code. Similarly, Thailand’s PromptPay, Indonesia’s QRIS, Malaysia’s DuitNow QR, the Philippines’ QR Ph, Vietnam’s VietQR, Cambodia’s KHQR, and Myanmar’s MMQR all represent national efforts to standardize QR payments and ensure interoperability among banks, e-wallets, and payment providers.

Japan presents a unique case. Despite being the birthplace of QR-code technology, the country initially experienced fragmentation, with many competing payment services such as PayPay and others. To address this issue, the Cashless Promotion Council introduced JPQR, a unified QR payment standard. More recently, Japan has begun connecting JPQR with overseas systems, including those of Cambodia and Indonesia, improving convenience for international visitors and businesses.

A major trend highlighted in the presentation is the shift from national standardization to international connectivity. Singapore has taken a leadership role by linking PayNow with Thailand’s PromptPay and subsequently connecting with payment systems in India, Malaysia, and Indonesia. Additional links with other ASEAN countries are under development. Meanwhile, Alipay has established partnerships with more than 50 payment providers across Asia, creating a broad network of interoperable QR payment services.

Another emerging development is the integration of stablecoins into QR payment infrastructures. Pilot projects are exploring how stablecoins can serve as the settlement layer behind QR transactions, enabling 24/7 cross-border payments with lower foreign-exchange and transaction costs. Examples include stablecoin payment trials in Japan and initiatives by regional platforms such as Grab.

In conclusion, QR payments have evolved from a simple payment method into a strategic digital infrastructure for Asia. Governments have promoted common standards and interoperability, while cross-border connections are gradually creating a seamless regional payment network. Looking ahead, the combination of QR payments, real-time settlement systems, and stablecoin technology may further accelerate financial integration across Asia.

[Summary] Impact of Japan’s Revised Insurance Business Act on InsurTech and Digital Transformation| FinTech Topics #128

FinTech Topics

[Summary] Impact of Japan’s Revised Insurance Business Act on InsurTech and Digital Transformation| FinTech Topics #128

（Original Video in Japanese was published on the FINOLAB CHANNEL on May. 19, 2026 by Makoto Shibata）　https://youtu.be/sHw7NkkiDTg

Japan’s revised Insurance Business Act, which will take effect in June 2026, represents the most significant reform of insurance regulation since 2014. The amendment is designed to address a series of misconduct cases that have undermined trust in the insurance industry and to promote a more customer-centric insurance distribution model. At the same time, the reform is expected to accelerate digital transformation and create substantial opportunities for InsurTech companies.

The regulatory changes were prompted by several high-profile scandals. These included allegations of premium coordination among major non-life insurers, fraudulent insurance claims associated with automobile dealer Big Motor, conflicts of interest within insurance agencies, and incidents involving the unauthorized sharing of customer information by secondees. Collectively, these cases exposed weaknesses in governance, compliance, and customer protection across the insurance sector.

In response, the revised law introduces stronger governance and compliance requirements for large-scale insurance agencies and insurance companies. Major agency groups will be required to appoint compliance officers, establish complaint-handling frameworks, strengthen internal controls, and implement whistleblowing and internal audit systems. Insurance companies will also face enhanced oversight responsibilities when outsourcing sales activities to agencies. Furthermore, the reform prohibits excessive benefits or incentives that could distort fair insurance recommendations.

Perhaps the most important change concerns insurance sales practices. Historically, many agencies recommended products based on their own internal criteria, commission structures, or preferred partnerships with insurers. Under the revised framework, agencies will be expected to recommend products based on customers’ actual needs and interests. They must provide clear explanations of why a particular product was selected, document comparison criteria, and maintain records of the recommendation process. This significantly increases the importance of transparency, accountability, and evidence-based sales practices.

As a result, the insurance industry is likely to undergo several structural shifts. Sales activities will move away from individual salesperson judgment and toward data-driven decision-making. Business models focused primarily on product sales will increasingly evolve into customer-value-centered models. Documentation, auditability, and evidence management will become critical capabilities. In addition, smaller agencies may face increasing compliance burdens, potentially accelerating industry consolidation.

These developments create a favorable environment for InsurTech innovation. Demand is expected to grow for AI-powered comparison and recommendation tools, explainable AI systems, compliance monitoring solutions, and software platforms that manage sales processes and regulatory requirements. Technologies such as eKYC, digital signatures, voice-recording tools, and RegTech solutions will become increasingly important. Embedded insurance models are also expected to expand as insurers seek more efficient and customer-friendly distribution channels.

Several Japanese InsurTech companies are already well positioned to benefit from these trends. Sasuke Financial Lab operates digital insurance comparison services that provide access to products from numerous insurers. Hokan offers SaaS solutions that integrate customer information, policy management, compliance controls, and sales records for insurance agencies. Finatext’s Inspire platform supports digital insurance distribution and embedded insurance services while enabling rapid product deployment and system integration.

In conclusion, the 2026 revision of Japan’s Insurance Business Act is more than a regulatory compliance initiative. It represents a fundamental shift toward customer-centricity, transparency, and operational excellence. As insurers and agencies adapt to these new requirements, digitalization and AI adoption are likely to accelerate. The ability to demonstrate customer benefit and maintain transparent decision-making processes will become a key competitive advantage, creating significant growth opportunities for InsurTech firms and technology providers across the insurance ecosystem.

［Summary］ Evolution of GCCs in India

FINOLAB COLUMN, RESEARCH

［Summary］ Evolution of GCCs in India

（Original article in Japanese by Makoto Shibata was published for FinTech Journal on Mar. 1２, 2026）　https://www.sbbit.jp/article/fj/182208

The Black Swan Summit India 2026, held in Bhubaneswar, Odisha, highlighted a significant transformation in India’s Global Capability Centers (GCCs). Traditionally known as an offshore development hub focused on cost efficiency, India is now evolving into a global center for financial innovation and advanced digital capabilities.

Historically, Japanese and global financial institutions leveraged India for IT outsourcing, including system development and back-office operations. However, this model is rapidly shifting. GCCs are increasingly established as in-house, strategically controlled global hubs responsible for high-value functions such as AI development, data analytics, risk management, and even global business strategy. India has become the world’s largest GCC hub, with over 1,700 centers.

This shift is particularly evident in the financial sector, where increasing regulatory complexity, AML requirements, fraud detection, and AI-driven risk management demand deeper integration of business knowledge and technology. As a result, companies are moving away from outsourcing toward internal capability building through GCCs.

Odisha represents a new phase in this evolution. While traditional GCC hubs were concentrated in major cities like Bengaluru and Hyderabad, rising costs and talent competition are driving expansion into Tier-2 cities. Odisha is positioning itself as a FinTech-focused GCC destination, leveraging India’s Digital Public Infrastructure (DPI)—including UPI, Aadhaar, and ONDC—to create a unique environment for financial innovation. The state is also investing in advanced talent development, particularly in AI.

For financial institutions, this marks a structural shift. GCCs are no longer limited to downstream implementation tasks but are increasingly responsible for upstream functions such as business design, algorithm development, and innovation. In areas like credit modeling and fraud detection, GCCs are becoming central to competitive advantage.

For Japan, the implications are significant. Amid domestic IT talent shortages, Indian GCCs—especially in emerging regions like Odisha—can be redefined not merely as cost-saving options but as strategic partners in co-creating financial digital transformation (DX). This perspective is already reflected in the growing interest of major Japanese financial institutions, such as MUFG and SMBC, in expanding their presence and collaboration in India.

Overall, the evolution of GCCs in India represents a transition from efficiency-driven outsourcing to innovation-driven global R&D strategy, supported by both the scale and quality of India’s talent pool.ns capable of making concrete strategic choices will capture the next wave of growth.

［Summary］ Key FinTech Predictions and Strategic Actions for 2026

FINOLAB COLUMN, RESEARCH

［Summary］ Key FinTech Predictions and Strategic Actions for 2026

（Original article in Japanese by Makoto Shibata was published for FinTech Journal on Jan. ４, 202６） 　　https://www.sbbit.jp/article/fj/177565

The report outlines major trends shaping the fintech landscape in 2026, marking a transition from experimentation to full-scale implementation. Over the past decade, collaboration between startups and traditional financial institutions has matured, moving beyond “proof-of-concept fatigue” toward meaningful business integration, including investments and acquisitions. Against this backdrop, 2026 is expected to be a decisive year for execution and scaling.

1. Expansion of Stablecoins and Crypto Regulation

Global momentum around stablecoins has accelerated following regulatory developments such as the U.S. GENIUS Act. In Japan, yen-denominated stablecoins have emerged, and further practical use cases—such as cross-border payments and interoperability with USD stablecoins—are expected. At the same time, crypto assets may be reclassified as financial instruments, introducing stricter regulations including insider trading rules.

2. Growth of Tokenization

Tokenization of assets, particularly real estate, is expanding rapidly in Japan, with market size doubling year-on-year. New asset classes such as private equity are entering the space, signaling broader adoption. Standardization of issuance, custody, and trading infrastructure will be critical for scaling.

3. Practical Use of Generative AI and AI Agents

Generative AI is moving from experimental use to real-world applications, including customer-facing advisory services. The evolution toward AI agents—capable of autonomously executing tasks—is expected to reshape operational processes, starting with workflow-based systems and progressing toward more autonomous models.

4. Advancement of Personalization

AI-driven personalization will transform financial services by leveraging customer data to provide tailored financial advice and products. In insurance, usage-based models incorporating behavioral and IoT data (e.g., wearables, smart homes) will become more prominent.

5. Expansion of Cloud Adoption

Cloud migration in core banking systems is accelerating, driven by improved security, regulatory flexibility, and cost efficiency. While digital banks are leading, regional banks face challenges in expertise and governance, highlighting the need for talent development.

6. Rise of Embedded Finance and BaaS

Financial services are increasingly embedded into non-financial platforms, making finance seamless within everyday services. BaaS models are diversifying, enabling tailored banking solutions for SMEs, foreign residents, and specific industries.

7. Evolution of Digital Identity and KYC

Japan’s digital ID infrastructure, centered on the My Number card, is becoming the foundation for identity verification. Regulatory changes will phase out less secure methods, pushing financial institutions toward more robust digital authentication systems.

8. Corporate Account Risks and Opportunities

Corporate accounts are under greater scrutiny due to fraud and money laundering risks. At the same time, competition to serve SMEs is intensifying, with opportunities to expand lending using alternative data and improved user experience.

9. Increase in Digital Financial Crime

Cybercrime is becoming more sophisticated, including account takeovers and ransomware attacks. Financial institutions must adopt multi-layered security strategies, while AI-driven fraud detection will play a key role.

10. Emergence of Quantum Technology Risks

Although practical quantum computing is still years away, the threat to current cryptography is driving early adoption of post-quantum cryptography (PQC). Financial institutions are expected to begin preparing migration strategies.

Conclusion

These ten trends are interconnected and collectively push fintech into a new phase of implementation. Technologies such as stablecoins, tokenization, AI, and cloud are no longer theoretical—they are actionable. In 2026, success will depend on how decisively organizations move from concept to execution.

  • Financial institutions must redesign their business models to integrate into broader ecosystems.
  • Fintech companies must deliver scalable, regulation-compliant solutions.
  • Policymakers must balance innovation with risk management.

Ultimately, 2026 will be a year where only organizations capable of making concrete strategic choices will capture the next wave of growth.

[Summary] Detecting Fraud Signals in Startups through AI

FINOLAB COLUMN, RESEARCH

[Summary] Detecting Fraud Signals in Startups through AI

（Original article in Japanese by Makoto Shibata was published for FinTech Journal on Oct. 9, 2025）　https://www.sbbit.jp/article/fj/172629

The report examines recurring cases of fraudulent disclosure among startups, highlighted by the accounting scandal of a recently listed Japanese company that collapsed shortly after its IPO. Similar cases—such as inflated revenues through circular transactions, fictitious sales, premature revenue recognition, and misleading disclosures—demonstrate that financial misconduct is not isolated but systemic.

Why Fraud Repeats

The report identifies common underlying factors:

  • Strong pressure to show rapid growth and achieve high valuations
  • Lack of integrity in top management
  • Weak internal controls and governance
  • Inadequate responses to auditors
  • Investor bias toward cutting-edge sectors such as AI or biotech

Fraud often begins even before IPO preparation and typically follows three patterns: revenue manipulation (e.g., circular transactions), exaggeration of business performance, and governance failures.

Key Investor Checkpoints

Investors—especially in growth-stage startups—should critically assess:

  1. Revenue credibility (e.g., circular flows, concentration of clients, cash collection evidence)
  2. Validity of technology and business claims
  3. Related-party transactions and goodwill accounting
  4. Strength of internal controls and audit quality
  5. Disclosure practices and management behavior

The report stresses that financial figures alone are insufficient; understanding the underlying business reality is essential.

Role of AI in Fraud Detection

Advances in AI are enabling earlier detection of fraud signals through:

  • Automated analysis of contracts, invoices, and financial transactions
  • Cross-checking external data (registries, news, credit data)
  • Verification of scientific and technical claims via global databases
  • Sentiment and consistency analysis of disclosures
  • Continuous monitoring of news, social media, and business metrics

AI can generate risk scores, dashboards, and audit trails, improving transparency in investment decisions. However, it should be viewed as a “sensor” for early warning, not a definitive detector.

Implications for Startup Investment

The adoption of AI shifts the paradigm from post-fact detection to early-stage prevention of fraud. As regulatory reforms expand startup investment opportunities in Japan, enhancing disclosure reliability becomes increasingly important.

Going forward, investors will need to integrate not only financial data but also non-financial and societal impact metrics, supported by AI-driven analysis, to make more robust investment decisions.

[Summary] Future of Payment Systems in Japan: From the Study Group Report from Zengin System | FinTech Topics #126

FinTech Topics

[Summary] Future of Payment Systems in Japan: From the Study Group Report from Zengin System | FinTech Topics #126

（Original Video in Japanese was published on the FINOLAB CHANNEL on Mar. 31, 2026 by Makoto Shibata）

The study group report on the Future of Payment Systems in Japan was published on Mar. 19, 2026, focusing on the Zengin System, Japan’s core interbank settlement infrastructure. While the Zengin System has long supported reliable bank transfers, it now faces growing pressure to evolve due to rapid changes in the financial landscape.

1. Limitations of the Current System

  • The Zengin System is highly stable but not designed for real-time, 24/7 digital demands.
  • It reflects a legacy structure optimized for traditional banking rather than modern, data-driven finance.

2. Rise of New Payment Needs

  • Increasing demand for instant payments, always-on availability, and seamless user experience.
  • Growth of cashless payments, fintech services, and platform-based economies is reshaping expectations.

3. Competition and External Pressure

  • Non-bank players and fintech companies are introducing more flexible and user-centric payment solutions.
  • Global trends (e.g., real-time payment systems in other countries) highlight the need for Japan to modernize.

4. Direction of Reform

  • The report suggests upgrading infrastructure toward:
    • 24/7 real-time processing
    • Open and interoperable systems
    • Enhanced data utilization (beyond simple fund transfers)
  • Emphasis on collaboration between banks, FinTech companies, and other industries.

5. Strategic Implications

  • Payment systems are no longer just “infrastructure” but a core competitive domain.
  • Future financial services will be built around embedded finance, APIs, and ecosystem integration.

Conclusion

The video concludes that Japan’s payment system must transition from a bank-centered, batch-processing model to a real-time, ecosystem-driven platform.
This transformation is essential not only for maintaining competitiveness but also for enabling innovation in the broader digital economy.

[Summary] Implementation of Enterprise Value Collateral: Expanding Funding Options for Startups | FinTech Topics #125

FinTech Topics

[Summary] Implementation of Enterprise Value Collateral: Expanding Funding Options for Startups | FinTech Topics #125

（Original Video in Japanese was published on the FINOLAB CHANNEL on Feb. 24, 2026 by Makoto Shibata）

On May 25, 2026, Japan will reach a historic milestone in its financial evolution with the enforcement of the “Act on Promotion of Business-Based Financing.” The centerpiece of this legislation is the introduction of “Enterprise Value Collateral Rights”—a new lending framework designed to move away from the traditional reliance on real estate collateral and personal guarantees from business owners.

1. What is “Enterprise Value Collateral”?

Historically, Japanese bank loans have required “tangible assets” such as land or buildings as security. However, the core strengths of modern startups and service industries lie in “intangible assets”—brands, proprietary know-how, and customer bases.

  • Scope of Collateral: This right covers a company’s “total assets.” This includes future assets, intellectual property, business models, and projected cash flows.
  • Evaluation Perspective: Instead of looking solely at past financial statements or real estate appraisals, lenders will evaluate a company’s future potential and growth capacity.
  • The Mechanism: The right is established and registered via a trust agreement. In the event of default, the principle is to pursue a “business transfer” (selling the business as a whole) rather than liquidating individual assets, ensuring business continuity.

2. Why is this Reform Necessary Now?

Japan’s traditional financial system has faced long-standing criticism for two main reasons:

  1. Limited Growth Support: Even high-growth companies were often unable to secure sufficient loans because they lacked physical collateral.
  2. Rigid Supply of Capital: It was difficult to provide capital flexibly for critical stages such as business succession or corporate restructuring.

Under the new system, if a business can prove its future viability, it is expected that the flow of “risk money” will improve across all phases: from founding and growth to turnaround.

3. Benefits for Startups: The Coexistence of Debt and Equity

For startups—particularly those between Series A and Series B rounds—this system serves as a powerful new tool.

  • Preventing Equity Dilution: Previously, founders were forced to rely almost entirely on Venture Capital (equity), often leading to excessive dilution of their ownership. Now, “Bank Loans (Debt)” become a viable alternative.
  • Lending Possible Despite Deficits: For SaaS companies that are in the red due to heavy upfront investment, banks can now provide growth capital if they can verify healthy KPIs, such as low Churn Rates or high LTV (Lifetime Value).
  • Clearer Role Division: A synergy will emerge where VCs provide “aggressive risk money” for high-stakes bets, while banks provide “stable growth capital” based on business value.

4. The Challenge of “Advanced Discernment”

For this system to succeed, several hurdles must be overcome:

  • Establishing Evaluation Models: Determining who measures business value and how is critical. There is an urgent need for specialists and models capable of judging market growth and human capital.
  • Monitoring Burden: Startups will be required to maintain transparent KPI management and actively disclose both financial and non-financial information.
  • Regional Bank Capabilities: A major focus will be whether regional banks, which may have limited specialized personnel, can effectively step into this advanced form of credit judgment.

5. Case Studies: Pioneers of Venture Debt in Japan

While the formal introduction of the “Enterprise Value Collateral” system is set for 2026, several forward-thinking financial institutions and startups are already paving the way. By utilizing creative debt structures, these players are providing vital capital to startups that have traditionally been overlooked.

  • Aozora Bank: A true pioneer in the space, Aozora has a long-standing history of actively promoting debt financing for venture companies, leveraging internal expertise to evaluate high-growth potential where others saw only risk.
  • UPSIDER & Mizuho Bank: One of the most notable recent developments is the “UPSIDER Blue Dream Fund.” This collaboration combines the speed of a fintech startup with the capital strength of a megabank, creating a fund specialized specifically in venture debt.
  • Flex Capital (Fivot): As a representative of fintech-led lending, Flex Capital provides data-driven venture debt. They offer a flexible alternative to equity financing, allowing founders to fuel growth without immediate dilution.
  • Siiibo Securities: In a clever use of existing financial instruments, Siiibo enables startups to raise what is essentially venture debt by issuing corporate bonds via private placement. This demonstrates how existing systems can be innovated to create new pathways for capital.

Summary: A System that Tests the “Power of Belief” in the Japanese Economy

The introduction of Enterprise Value Collateral is more than just a new loan product. It is a system that tests how much Japan’s indirect financial sector can truly “believe in” and support the future potential of its companies.

If banks can accurately evaluate the growth margins of startups and deepen their relationships, the Japanese economy stands a real chance of returning to a path of powerful, sustained growth.

[Summary] Japan’s Crypto Transformation: Shifting from “Means of Payment” to “Financial Instruments” | FinTech Topics #124

FinTech Topics

[Summary] Japan’s Crypto Transformation: Shifting from “Means of Payment” to “Financial Instruments” | FinTech Topics #124

（Original Video in Japanese was published on the FINOLAB CHANNEL on Jan. 20, 2026 by Makoto Shibata）

On December 10, 2025, the Financial System Council’s Working Group (WG) released a report that marks a historic turning point for digital assets in Japan. Based on these recommendations, specific legislative amendments are expected to be finalized over the next one to two years, fundamentally reclassifying crypto assets within the Japanese legal framework.

1. Background: The Evolution into an Investment Asset for 13 Million Users

While crypto assets like Bitcoin were originally introduced as a “means of payment” for seamless transactions, the reality in Japan has shifted significantly:

  • Market Scale: Domestic crypto accounts have exceeded 13 million, with assets under custody reaching approximately 5 trillion yen.
  • User Intent: Nearly 90% of users hold crypto for long-term investment purposes—a higher ownership rate than Forex (FX) or corporate bonds.
  • Critical Issues: Challenges such as opaque information disclosure, scams by unregistered operators, cybersecurity breaches, and a lack of measures against unfair trading have necessitated a more robust framework.

To address these realities, a new system is required to protect users as “investors” rather than just “consumers.”

2. Fundamental Regulatory Overhaul: Transitioning to the FIEA

The most significant change is the shift of the legal basis from the Payment Services Act to the Financial Instruments and Exchange Act (FIEA).

  • Unified Regulation: By integrating crypto under the FIEA, Japan aims to enhance market fairness and investor protection to the same standard as traditional stocks and bonds.
  • Scope: While “Crypto Assets” are the primary focus, NFTs and Stablecoins will continue to be regulated under existing frameworks tailored to their specific functions.

Strengthening Information Disclosure

To eliminate information asymmetry, the following obligations are being considered:

  • Issuers: Mandatory disclosure of information at the time of new sales for centralized projects.
  • Exchanges: An obligation to gather technical data and provide it to users in an easy-to-understand format.
  • Continuous Disclosure: Ongoing reporting of material events that could impact investment decisions, alongside periodic financial disclosures.

3. Cracking Down on “Unfair Trade”: Insider Trading Regulations

Insider trading regulations, previously reserved for the securities market, will now be applied to crypto assets.

  • Prohibited Acts: Individuals with access to “material non-public information” will be banned from trading before public disclosure.
  • Examples of Material Facts: Bankruptcy of an issuer, discovery of major security risks, info regarding new listings or delistings, and large-scale trades exceeding 20% of the circulating supply.
  • Enforcement: The introduction of a monetary surcharge system (administrative fines) will significantly strengthen legal enforcement.

4. The Long-Awaited 20% Separate Taxation

Perhaps the most impactful change for investors is the tax reform. Following a Cabinet decision on December 26, 2025, a major policy shift was announced:

  • Current Status: Classified as “Miscellaneous Income” subject to aggregate taxation (with a maximum tax rate of 55%).
  • New Policy: Transition to 20% separate taxation (15% income tax and 5% local inhabitant tax), aligning crypto with other financial instruments under the FIEA.

This change is expected to allow for profit/loss carryforwards and significantly elevate the status of crypto assets as a legitimate investment vehicle.

5. Impact on Business and Future Outlook

The regulatory landscape for businesses will undergo a dramatic transformation:

  • Increased Burden on Exchanges: Operators will face stricter “ancillary business restrictions” and security requirements equivalent to Type I Financial Instruments Business operators. Requirements for “liability reserves” against hacks may increase operational costs and entry barriers.
  • Lower Barriers for Financial Institutions: Following the reform, banks and insurance companies may be permitted to hold crypto assets directly. Furthermore, their subsidiaries are expected to be allowed to engage in exchange services and investment management.

Conclusion

By reclassifying crypto assets as financial instruments, this shift effectively resolves the issues found under previous payment-focused regulations.

While increased compliance costs remain a challenge for operators, the transition to 20% separate taxation provides a massive tailwind for general investors. Though full implementation may take up to two years, the roadmap is now clear, and the industry is entering a new era of institutional maturity.