🏛️6. Legal

Legal Issues Related to Crypto Assets

As the digitization of finance accelerates, crypto assets which allow borderless movement through the digital space, are accelerating based on the philosophy that decentralization technology will solve the problems of existing money transfer systems. On the other hand, this has also raised new problems, such as concerns about money laundering and terrorist financing, and the outflow of customer assets due to hacking. In addition, as seen with the collapse of FTX, there is an increased credit risk to cryptocurrency-related companies, and regulators in various countries are under pressure to comply with laws and regulations for customer protection, anti-money laundering, and counter-money laundering and counter-terrorist financing (AML/CFT) measures.

Current State of Japanese Law

In April 2017, Japan became the first country in the world to clearly stipulate cryptocurrencies in the Funds Settlement Law, as well as in the Act on Prevention of Transfer of Criminal Proceeds (Criminal Proceeds Control Law), where AML/CFT is implemented.

As a result, cryptocurrency exchangers are required to be registered, and investor protection is provided through the segregation of customer money and cryptocurrency, system security management, and external auditing of financial statements. A legal framework has also been established to deal with AML/CFT, including identification at the time of transactions and the establishment of a monitoring system for cryptocurrency transfers.

Some argued that the legal constraints surrounding Japan’s cryptocurrency industry are too harsh. However, the fact that FTX Japan (the Japanese subsidiary of FTX) was found to have protected client assets at the time of FTX's failure has led to the currently dominant view that Japan was taking a better approach.

Stablecoin Legislation

The Funds Settlement Law has also been amended to cover stablecoins from June 2023. In particular, for stablecoins to be distributed domestically, the underlying assets must be held in trust, thus making customer protection and AML/CFT compliance mandatory for not only cryptocurrencies but for stablecoins as well.

Compliance Policy

In promoting SMP and its quest for "sustainability," we at DMM Crypto will not only comply with all laws and regulations related to our business activities but also respect social ethics and provide services that mature responsibly and sustainably.

In providing our web3 business, we will comply with the "Funds Settlement Law", "Financial Instruments and Exchange Law", "Act on Prevention of Transfer of Criminal Proceeds", "Personal Information Protection Law", "Consumer Protection Law" and other important laws and regulations in Japan, and in our overseas operations we will comply with the laws and regulations of the jurisdictions where the consumers who use our services reside.

In Japan, trading of crypto assets (buying and selling, etc.) requires an official registration as a crypto asset exchange business. DMM Bitcoin, which plays a role in promoting SMP and DMM Crypto, is an officially licensed company in the cryptocurrency exchange business and financial instruments business and strictly complies with laws and regulations in the operation of its services. In addition to legal compliance, DMM Bitcoin has established a "Customer-Oriented Business Operation Policy," "Privacy Policy," "Security Policy," "System Risk Management Policy," and "AML/CFT Policy," and has built a strong internal control system for customer protection, system risk management, and AML/CFT. Seamoon Protocol will make the most of its experience in its business operations.