2544 The Regulation of New Forms of Electronic Fund Transfers in Japan Focusing on Electronic Money Cross Border Service: Why do We Need to Examine the Possible Application of Japanese Laws? When an overseas payment enterprise provides a r e s id e n t of J a pa n w i t h s e r v i c e , u n l e s s t h e e n t e r p r i s e has a presence in Japan, article 61 of the Japanese Banking law may be applied (Kubota, T., 2003 27 ). Moreover, in the Hourei, the Law Application Principles Act, the rule governing the application of laws in private international law has been revised completely and will become effective in January, 2007. This new rule will make provisions of Japa- nese law that protect consumers apply to disputes between foreign companies and consumers living in Japan as much as possible, when a foreign company provides goods or services to consumers living in Japan. It is not clear whether Japanese regulations for consumer protection currently apply to overseas Electronic Money service providers because the arguments regarding this new general rule have not yet been fully explored. 28 Online Escrow Service 29 I n a n o n l i n e e s c r ow s e r v i c e , o n e p a r t y d e p o s it s h i s credit card or debit card having monetary value with an escrow agent. The agent delivers these deposits to the opposing party after the agent FRQ¿UPV WKDW WKH RSSRVLQJ SDUW\ KDV IXO¿OOHG his obligations. Moreover, although the fee for escrow services is consideration not for exchange services, but for temporary retention services, the target object of the service includes monetary value. This service may therefore be interpreted DVDQ³H[FKDQJHWUDQVDFWLRQ´ Online escrow services may also contradict the Deposit Law (Kubota, T., 2003 30 ). WHEN OVERSEAS DIGITAL GOLD CURRENCY ENTERPRISES PROVIDES RESIDENTS OF JAPAN WITH SERVICE Why do We Need to Examine the Possible Application of Japanese Laws? For the purposes of this chapter, Digital Gold Cur- UHQF\LVGH¿QHGDVDQ\HOHFWURQLFFXUUHQF\LVVXHG by a private company to be used for international online payments, and involving international cur- rency exchange. Most Electronic Money issuers limit domestic consumers to those within the same country as the one where the issuer resides. When an overseas Digital Gold Currency enterprise provides a resident of Japan with service, and the enterprise does not have a presence in Japan, Japanese law may be applied as stated. The next paragraph is based on the assumption that there is a theoretical possibility that Japanese regulations apply to overseas electronic money services. The Possibility of Public Law-Regulations being Applied to Overseas Digital Gold Currency It will be examined whether Japanese regulations on Electronic Money apply to the services provid- ed by overseas Digital Gold Currency companies to consumers living in Japan, taking e-gold as an example. 31 A commission is collected from the side receiving money at the time of receipt. E-gold works as follows. A user pays cash into his account of e-gold in order to purchase e-metal, which is the Digital Gold Currency of the e-gold system, and stores such e-metal in his account. The worth of the e-metal in his account is displayed as a result of conversion into main currencies. Usually, e-gold backs the e-metal with 2545 The Regulation of New Forms of Electronic Fund Transfers in Japan Focusing on Electronic Money gold equivalent to the worth of the e-metal and the conversion rate of e-metal in user accounts ÀXFWXDWHV DFFRUGLQJ WR FKDQJHV LQ WKH PDUNHW price of gold. The components of e-gold are as follows: (i) e-gold issues e-metal, electronic data (money value information) corresponding to funds paid by e-gold users (ii) users holding e-metal can electronically transfer this to other users' accounts by giving directions to e-gold, and, thereby, can use such e-metal to settle debts, such as purchase goods and (iii) the holder of e-metal can request that e-gold the user’s e-metal into cash. Component (iii) is equivalent to General Cashability. E-gold seems to be comparable to Electronic Money issued in Japan with General Cashability and versatility, since the money-value information is recorded solely on the server of e-gold. 6LQFHWKHUHLVQRFHUWL¿FDWHWKH3UHSDLG&DUG /DZDQGWKH%LOODQG6LPLODU&HUWL¿FDWHV&RQWURO Law do not apply to e-gold transactions. However, there seems to be a risk that e-gold transactions would be contrary to the Deposit Law and the Banking Law. BRIEF COMPARISON WITH REGULATIONS OF U.S. AND E.U. General In order to search for desirable countermeasures to the rapid spread of Electronic Money in Ja- SDQLWPD\EHXVHIXOWRVWXG\WKH³ZDLWDQGVHH´ regulations in place in the U.S. and the rigid and detailed regulations in the E.U., which, among other things, limit issuers to banks in the E.U. U.S. and Japan The principal legislative acts regulating electronic payment system in the U.S. are the Electronic Fund Transfer Act (ETFA) and its associated regulations (Regulation E). They basically target FRQVXPHUSURWHFWLRQDQGDSSO\WR³DFFRXQWDEOH´ VWRUHGYDOXHV\VWHPV7KLV³DFFRXQWDEOH´FODV- VL¿FDWLRQLVGHFLGHGEDVHGRQZKHWKHUPRQHWDU\ value information may be affected by a change in a consumer’s bank account. As previously indicated, this chapter focuses on the unac- countable type. In state-level regulations, Money Transmitter Laws apply to non-banking payment services including electronically stored value. Only authorized transmitters and distributors may issue and sell certain types of means of payment. Authorized transmitters have to safely retain advance payment funds in full until used by a consumer. Authorized distributors have to send advance payment funds to authorized transmitters. These regulations preserving advance payment funds are stricter and cover more services than the regulations by the Japanese Prepaid Card Law, s tated previou sly i n p ar t . T his reg u lation for preserving advance payment funds may serve as a guide to Japanese authorities. E.U. and Japan In Directive 2000/46/EC of the European Parlia- ment and of the Council of September 18, 2000 on the taking up, pursuit of, and professional supervi- sion of the business of electronic money institutions WKH³(&'LUHFWLYHRQ(0´(OHFWURQLF0RQH\LV GH¿QHG DV³PRQHWDU\YDOXH DVUHSUHVHQWHG E\D claim on the issuer which is: (i) stored on an elec- tronic device (ii) issued upon the receipt of funds of an amount not less in value than the monetary value issued (iii) accepted as means of payment by undertakings other than the issuer” (Item (b), 3DUDJUDSK $UWLFOH7KLV GH¿QLWLRQ LQFOXGHV both the IC-chip type and the Server-managing type, however, as already written, E.U. regulations are applied only to the External type. Under the EC Directive on EM, issuers of electronic money must obtain business licenses. In addition, the Directive regulates prohibitions on 2546 The Regulation of New Forms of Electronic Fund Transfers in Japan Focusing on Electronic Money engaging in other businesses, initial and ongoing capital requirements, and limitations on invest- ments. E.U. regulations are especially rigid in limiting issuers to banks only. One of the principal differences between the electronic money regulations of the E.U. and Japan is redeemability (Article 3, the EC Directive on EM). Japanese electronic money issuers in Japan do not give refunds for purchased electronic money in order to avoid violating the Deposit Law. Based on the Chairman Memorandum, Japanese authori- ties may be favor of granting General Cashability to electronic money through discussions on the Deposit Law and the Banking Law. POSSIBLE LEGISLATION ON ELECTRONIC MONEY IN THE FUTURE The Chairman Memorandum does not specify how the government should legislate to protect consumers and encourage the development of the Electronic Money industry in Japan. Professor Shinsaku Iwahara suggests concrete ideas for amending the Prepaid Card Law (Iwahara, S., 2005 32 ). Some practitioners argue that the govern- ment should divide the Prepaid Card Law into a part regulating electronic records and another part regulating all other prepaid vouchers, and establish new legislation covering electronic money. In order to determine ideal regulations, it is necessary to take into consideration point- based reward programs and Server-managing type services especially (Maeda, Y., 2005 33 ). In addition, establishing and amending legislation in response to the expansion of the online payment service business may grant legal OHJLWLPDF\WRQRQ¿QDQFLDOLQVWLWXWLRQVHQWHULQJ into the general payment business, including the R QO L QH SD \P HQWE XV L QH VV 6 RPH H[ L VW L QJ¿ Q D QFLDO institutions, including banks, are not in favor of such expansion, and it will take a great deal of time to introduce radical regulations dealing with electronic money. The need for regulations protecting consumers is urgent, however, and therefore it seems reasonable to develop such regulations prior to other regulations. EXTENDED RESEARCH I: REAL MONEY TRADE Why do We Need to Examine the Possibility of Application to RMT? An employee of an online game management company created virtual currency within an on- line game without proper authority, and obtained XQMXVWSUR¿WVWKDWDPRXQWHGWRWHQVRIPLOOLRQV 34 The Ministry of Economy, Trade and Industry requested online game management industry to take a precaution. It is not yet clear whether the Ministry of Economy, Trade and Industry will establish a new regulation system involving virtual currency, introduce new guidelines, or suggest self-regulation by the online game management industry. In November 2006, a foreign resident in Japan who sent 100 million yen to China without the SURSHU FHUWL¿FDWLRQ ZDV DUUHVWHG DQG FKDUJHG with being part of an RMT agency business. It is generally said that RMT broker payments should be regulated to some extent. RMT Broker RMT means exchanges of data corresponding to items and virtual currency in online games and user accounts in online games with assets, mostly real currency, in the real world. An RMT broker offers such services as mediating deals, escrow services for sale prices of items, buying items from sale candidates, and selling them to purchase candidates, and so forth. 2547 The Regulation of New Forms of Electronic Fund Transfers in Japan Focusing on Electronic Money Possibility of Regulations on RMT Broker Service to be Examined Among the various online payment services that u s e a n R M T b r o k e r, t h e m o s t l i k e l y t o b e r e g u l a t e d are escrow services, as they mediate money trans- fers between users who wish to purchase data or accounts and users who wishes to sell them. Regulations by Public Laws Such as the Banking Law Because the mentioned escrow service retains funds temporarily, there is a possibility that such services will be against the Deposit Law. Moreover, any payment between a purchase can- didate who is the user of an online game, and a sale candidate may be against the Banking Law. 7KHDUJXPHQWVLQSUHYLRXVO\PHQWLRQHG³RQOLQH escrow service” apply here as well. Foreign Payments: Money Laundering An RMT broker is comparable to an Electronic Money entrepreneur in respect of the possible application of money laundering-related regula- tions. However, unlike with general Electronic Money, RMT brokers in Japan are numerous and are relatively small-scale, and their services are OLPLWHGWRWKHVSHFL¿FSOD\HUZLWKZKLFKDXVHU is also engaged in RMT. If it is revealed later that the broker was temporarily used for money laundering purposes, it is more probable that a court will judge that the RMT broker recognized the fact that their service was used for money laundering at that time. Domestic Deployment of Online Game Which Features Conversion Virtual Currency to Real Money When an online game which can perform General Cashability into the currency of the real world from currency in a game is developed for Japan, the converting service concerned examines the SRVVLELOLW\RIFRQÀLFWLQJZLWKSXEOLFODZUHJXOD- tions in Japan. 35 As mentioned, even when the concerned online game management entrepreneur does not have a base in Japan, since the laws protecting consumer may be applied, they must be considered. A user can purchase currency in a game, and can sell and buy within the game using such currency. Since dealing within a game remains directly in the currency of the game, and the likelihood of violating the Banking Law is not very high, the possibility that the game will be against the Deposit Law regarding subscription cannot be denied, depending on the system of structuring fund transfers and conversions into and from virtual currency. EXTENDED RESEARCH II: POINT-BASED REWARDS PROGRAMS AND MILEAGE PROGRAMS Spread of Point-Based Rewards Programs and Mileage Programs Recently, the things to be provided for free under a points-based rewards program, air miles, and so forth, have become widespread and are similar to electronic money in having monetary value. When a consumer purchases goods and services, an entrepreneur gives the user points at no cost, and the consumer can use these points to purchase goods and services from the same entrepreneur 2548 The Regulation of New Forms of Electronic Fund Transfers in Japan Focusing on Electronic Money later. Mileage is monetary value which an airline gives to the user using one of its airplanes. The point-based reward system has conven- tionally only been used for purchasing goods and service from the entrepreneur who issued the points. Increasingly, however, many issu- ers of points and Mileage are forming business partnerships and these monetary value systems have become more versatile. In response to the expansion of this versatility, it will also be nec- essary to consider the application of public law regulations on Electronic Money to point-based or mileage systems. Discussions So Far The Prepaid Card Law does not apply to point- based or mileage systems, as an entrepreneur delivers points or miles to consumers at no cost, that is, accumulating points is not prepayment (FSA, 2004a 36 ). Subjects to be Studied Towards in the Future Points and miles are property rights exchange- able for goods or services. If a holder expects their points or miles to become more versatile, the necessity for consumer protection may arise (Sugiura, N., 2003 37 ). In recent years especially, when an entrepreneur offers a points with high trade-in value as an incentive for consumers to buy, consumer purchasing increases, and the points become more valuable. If different point- based rewards programs become more closely associated, versatility will increase considerably in the future. It may thus become necessary to consider the regulations from the viewpoint of consumer protection. The excessive regulations may be cumbersome for small-scale retail stores, and such stores may be forced to discontinue point-based reward sys- tems (Maeda, S., 2005 38 ). The author’s opinion is that such regulations may apply only to services that issue points or Mileage with a certain level of versatility, hold a certain amount of non-con- sumed monetary value in their system, or are regarded as currency-like by the public. Whether or not a service is regarded as currency-like may depend on various characteristics, including how long issued points or Mileage are available after issuance and further versatility obtained through different issuers’ partnerships. Regarding the amount of non-consumed monetary value, it seems rational to set criteria much higher than the number indicated by the Prepaid Card Law because many issued points and Mileage could very possibly expire. FUTURE RESEARCH DIRECTIONS The Nomura Research Institute predicted that the economic market size of points and mileage is- sued by companies will be over 450 billion yen in WKH¿VFDO\HDU1RPXUD5HVHDUFK,QVWLWXWH 2006b 39 ). Since 2005, the institute has advocated D QHZ FRQFHSW ³EXVLQHVV FXUUHQF\ LVVXHG E\ private companies” including points and mileage broadly and has urged establishing new legisla- WLRQVIRU³SULYDWHFXUUHQF\´LQFOXGLQJFRQVXPHU protection (Nomura Research Institute, 2006a 40 ). However, such new legislation is likely to impose excessively burdensome and unnecessary costs on points and mileage systems. Points and mileage are essentially a part of the promotional activities of private companies and excessive burdens may unfairly constrain those commercial activities. The FSA does not seem to have taken a positive view of this new concept either. One related interesting theme in the near future is how to resolve the issues of virtual economic trans- actions such as Second Life in relation to existing ¿QDQFLDODQGFRQVXPHUSURWHFWLQJUHJXODWLRQV$V 2549 The Regulation of New Forms of Electronic Fund Transfers in Japan Focusing on Electronic Money stated, there are many legal uncertainties regarding economic activities in Second Life (Nakazaki, T., 2007b, 2007c, 2007d 41 ). The FSA seems interested in these issues. These issues include taxation issues, online gambling regulations, general consumer protection regulations, and promoting regulations other than ones related to the legal issues discussed so far in this chapter. Another theme is how to deal with virtual prop- erty, including intellectual property. In the U.S., WKHUH DUH VHYHUDO IDPRXV IXOOÀHGJHG SXEOLVKHG discussions on laws related to this latter theme (Lem- ley, M. A., 2002; Wu, T., 2003; Grimmelmann, J. T. /)DLU¿HOG- 42 ). Of course, Japanese legislation based on the civil law system differs very much from U.S. legislation based on the common law system. However, Japan also needs to determine how to apply existing legislation and regulations on physical property to virtual property, and should consider the experience of the U.S. Furthermore, the Japanese government is con- tinuing to introduce a new system of electronic registration of accounts receivable, which will enable businesses to assign accounts receivable HOHFWURQLFDOO\ WKH ³(OHFWURQLFDOO\ 5HJLVWHUHG Receivables” [Denshi Touroku Saiken]). This new system is originally designed for B2B businesses, not B2C businesses such as Electronic Money. It has been pointed out that this new system may be used as a method of issuing Electronic Money. However, the report published by the Working Group on Information Technology Innovations and Financial Systems, Sectional Committee on Financial Systems of Financial System Council to the public entitled ‘’Towards the Establishment of an Electronically Registered Receivables Law (provisional name): Focusing on Approaches to the Establishment of an Electronically Registered Receivables Management Body’’ in December, 2006, clearly stated that it is unlikely that the new system may be used as a method of issuing Electronic Money (FSA, 2007 43 ). In design, an amendment to or a replacement of the Electronic Money regulations, the Electronically Registered Receivables system ought to be considered. REFERENCES FSA. (2004a). Financial Advisory Agency No Ac- tion Letter of April 20, 2004 to Barclay Vouchers K.K. Retrieved March 15, 2007 from http://www. fsa.go.jp/common/noact/kaitou/001/001_06b. pdf FSA. (2004b). Financial Advisory Agency No Ac- t i o n L e t t e r o f J u l y 9, 2 0 0 4 t o K . K . D a i i c h i - B u s s a n . Retrieved March 15, 2007 from http://www.fsa. go.jp/common/noact/kaitou/001/001_08b.pdf FSA. (2006). June 2006 newsletter in English (pp.2-3). Retrieved March 15, 2007 from http:// www.fsa.go.jp/en/newsletter/2006/06a.html#01 FSA. (2007). March 2007 newsletter in English (pp.23-25). Retrieved March 15, 2007 from http:// www.fsa.go.jp/en/newsletter/2007/02.pdf )DLU¿HOG-9LUWXDOSURSHUW\Boston University Law Review, 85, 1047-1102. Fujiike, T. (2002). Public regulations on settle- ment services by operating companies, i.e., not ¿QDQFLDO LQVWLWXWLRQV Kinyu-houmu-jij, 1631, 19-26. Tokyo: Kinzai. Grimmelmann, J. T. L. (2004). Virtual worlds as comparative law. New York Law School Law Review, 47, 147-184. Hiramatsu, M. (2006). The urgency of protecting electronic money users: issues related to prepaid electronic payments on the internet. Kinyu-zaisei- jijo, 2708,18-21. 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Retrieved March 15, 2007, from http://www.itmedia.co.jp/bizid/articles/0703/16/ news046.html Nakazaki, T. (2007d). Will real money trading be a legitimate business? Retrieved March 15, 2007, from http://www.itmedia.co.jp/bizid/ar- ticles/0701/26/news008.html Nomura Research Institute. (2006a). Business currency in 2010. Tokyo: Toyo Keizai Inc. Nomura Research Institute. (2006b). Estimates for QLQHPDMRULQGXVWULHVLQ-DSDQIRUWKH ¿VFDO year. Retrieved March 15, 2007, from (http://www. nri.co.jp/english/news/2006/060816.html Sugiura, N. (2003). Legal issues related to point- based rewards programs. Kinyu-zaisei-jijo,2561, 41. Tokyo: Kinzai. Sugiura, N., & Kataoka, Y. (2003). Future Elec- tronic Money and its legal infrastructure (p.38). Retrieved March 15, 2007, from http://www. fsa.go.jp/frtc/seika/discussion/2003/20030828- 2.pdf Working Group on Information Technology Inno- vations and Financial Systems under the Sectional Committee on Financial System of the Financial System Council of the Financial Services Agency. (2006). The chairman memorandum “Issues fac- ing the development of new electronic payment services.” Retrieved March 15, 2007, from www. fsa.go.jp/news/newsj/17/20060426-5/01.pdf Wu, T. (2003). When code isn’t law. Virginia Law Review, 89, 101-170. ADDITIONAL READING Honda, M. (2001). Legislation on transferring ¿QDQFLDO DVVHWV Minshouhou-zasshi, 123, 811- 865. 2551 The Regulation of New Forms of Electronic Fund Transfers in Japan Focusing on Electronic Money Hori, H., Rokugawa, H., & Fujiike, T. (2001). Discussion on the legal framework for internet escrow settlements. NBL, 707,29-39. Tokyo: Yuhikaku. Iida, K. (1998). Brief summary and current situation of electronic money. Jiyuu-to-seigi, 49(3),108-119. Tokyo: Japan Federation of Bar Assosication. Ishikawa, T. (2006). The urgency of protecting electronic money users: issues related to prepaid electronic payments on the Internet. Kinyu-zaisei- jijo, 2708,13-17. Tokyo: Kinzai. Iwahara, S. (2007). Legal issues related to private laws on electronic money. Future prospects of merchant law. Tokyo: Shouji-houmu. Kataoka, Y., & Seki, T. (1998). Legal issues related t o p u b l i c l a w s o n e l e c t r o n i c m o n e y. Kinyu-houmu- jijo, 1503, 38-44. Tokyo: Kinzai. .DZDPXUD6 'LYHUVL¿FDWLRQRIVHWWOH- PHQWVDQGSUHGLFWHGIXWXUHRI¿QDQFLDOUHJXOD- tions. Japan Research Review, 8, 5-38. Kubota, T. (2004). What is money? Kinyu-houmu- jijo, 1702, 9-19. Tokyo: Kinzai. Maeda, Y., Iawahara, S., & Takeuchi, H. (1990). Discussion meeting: Legal issues related to pre- paid cards. Jurist, 951, 18-33. Tokyo: Yuhikaku. Masuda, S. (1998). Legal issues related to private laws on electronic money. Kinyu-houmu-jijo, 1503, 45-52. Tokyo: Kinzai. Masuda, S., Iida K., & Uchiyama, R. (1998). Practice for electronic mone. Tokyo: Shin-ni- hon-houki. Morita, H. (1997). Legal framework for elec- tronic money part I. NBL, 616, 6-12. Tokyo: Yuhikaku. Morita, H. (1997). Legal framework for elec- tronic money part II. NBL, 617, 23-30. Tokyo: Yuhikaku. Morita, H. (1997). Legal framework for elec- tronic money part III. NBL, 619, 30-37. Tokyo: Yuhikaku. Morita, H. (1997). Legal framework for elec- tronic money part IV. NBL, 622, 33-39. Tokyo: Yuhikaku. Morita, H. (1997). Legal framework for elec- tronic money part V. NBL, 626, 48-56. Tokyo: Yuhikaku. Nomura Institute of Capital Markets Research. (1998). A move towards the formulation of elec- tronic money law. Retrieved March 15, 2007, from http://www.nicmr.com/nicmr/report/repo/ 1998/1998aut07.pdf Oguchi, H. (2002). The legal environment of electronic money. IT Law Taizen, pp.203-229. Tokyo: Nikkei BP. Ozawa, T. (1997). Legal relations among electronic money transaction parties and loss allocation part I. NBL, 623, 6-12. Tokyo: Yuhikaku. Ozawa, T. (1997). Legal relations among electronic money transaction parties and loss allocation part II. NBL, 624, 28-33. Tokyo: Yuhikaku. Ozawa, T. (1997). Legal relations among electronic money transaction parties and loss allocation part III. NBL, 625, 39-48. Tokyo: Yuhikaku. Shindou, K. (1998). Legal research intended for the realization of electronic money. NBL, 640, 6-39. Tokyo: Yuhikaku. Sudou, O. (1997). The evolution of computer net- works and related challenges. Jurist, 1117, 5-12. Tokyo: Yuhikaku. Sugiura, N. (2004). The development of the legal infrastructure for electronic money. Information Network Law Review, 3, 68-95. Tabuchi, T. (1996). Financial legal issues related to card-type electronic money. Kinnyuu Torihiki Saisentan, pp.3-14. Tokyo: Shouji-houmu. 2552 The Regulation of New Forms of Electronic Fund Transfers in Japan Focusing on Electronic Money Tachi, R. (1999). Interim Report. Retrieved March 15, 2007, from http://www.imes.boj.or.jp/japanese/ zenbun99/kk18-3-1.pdf Teramoto, S., Tanaka, Y., & Kunsen, G. (1997). Steps toward the practical use of electronic money part I. NBL, 614, 34-46. Tokyo: Yuhikaku. Teramoto, S., Tanaka, Y., & Kunsen, G. (1997). Steps toward the practical use of electronic money part II. NBL, 626, 57-66. Tokyo: Yuhikaku. Uchida, T., Kanda, H., & Dougauchi, M. (1997). Discussion on private law sphere of Electronic Money. Retrieved March 15, 2007, from http:// www.imes.boj.or.jp/japanese/zenbun97/kk16-2- 1.pdf Yamana, N. (1998). Brief overview of the second electronic money round-table conference report. Kinyu-houmu-jijo, 1523, 56-60. Tokyo: Kinzai. <DVXL7%ULHIRYHUYLHZRIWKH¿UVWHOHF- tronic money round-table conference report. NBL, 620, 6-10. Tokyo: Yuhikaku. <DVXL7%ULHIRYHUYLHZRIWKH¿UVW electronic money round-table conference report. Kinyu-houmu-jijo, 1487, 24-27. Tokyo: Kinzai. <DVXL7%ULHIRYHUYLHZRIWKH¿UVW electronic money round-table conference report. Jurist, 1117, 120-125. Tokyo: Yuhikaku. ENDNOTES 1 I would like to thank Keiko Kaneko, a partner of Anderson Mori & Tomotsune (AM&T), for providing helpful comments. I am also grateful to Takaharu Totsuka, a legal as- sociate, and Jonathan Ellison, a foreign legal clerk, of AM&T, for their assistance in preparing this article. 2 The Working Group on Information Tech- nology Innovations and Financial Systems under the Sectional Committee on Financial Systems of the Financial System Council of Financial Services Agency (2006). The chairman memorandum “Issues facing the development of new electronic payment ser- vices.” Retrieved March 15, 2007, from www. fsa.go.jp/news/newsj/17/20060426-5/01.pdf WKH³&KDLUPDQ0HPRUDQGXP´ 3 FSA. (2006). June 2006 newsletter in English (pp.2-3). Retrieved March 15, 2007, from http://www.fsa.go.jp/en/newsletter/2006/06a. html#01 4 7KH¿UVWUHSRUWZDVLVVXHGSXUVXDQWWR³7KH round-table conference for Electronic Money and electronic payment” led by the Ministry of Finance (May 23, 1997). Retrieved March 15, 2007, from http://www.fsa.go.jp/p_mof/ singikai/kinyusei/tosin/1a1201.htm 5 The second report was issued pursuant to ³7KHURXQGWDEOHFRQIHUHQFHIRUGHYHORSLQJ an environment for Electronic Money and electronic payment” led by the Ministry of Finance (June 17, 1998). Retrieved March 15, 2007, from http://www.fsa.go.jp/p_mof/singi- kai/kinyusei/tosin/1a1202.htm 6 7KH)(/$UWLFOH'H¿QLWLRQV Item 1 (7) "Means of payment" shall mean any one of those instruments mentioned as fol- lows: (a) Banknotes, Treasury notes, notes of small denomination, and coins; (b) Checks (including traveler’s checks), bills of exchange, postal money orders, and letters of credit; (c)Property values inputted in vouchers, electrical appliances or other instruments ……on electromagnetic system (electronic, magnetic or other systems that cannot be recognized by human perception) and which can be used for the payment among unspeci- ¿HGRUDODUJHQXPEHURISHUVRQV/LPLWHGWR those whose usage circumstance is similar to that of currency as prescribed by a cabinet order). 2553 The Regulation of New Forms of Electronic Fund Transfers in Japan Focusing on Electronic Money (d) What corresponds to those mentioned in (a) and (b) as pre scribed in a cabinet order. 7KH&DELQHW2UGHU$UWLFOH'H¿QLWLRQV Item 1 (1)Promissory note (excluding the one coming under securities or instruments designated in the following paragraph) (2) Of the one similar to either the one men - tioned in Article, 6, paragraph 1, item (7)-(a) or item (7)-b of the Law or the one mentioned in the preceding item, the one which can be used for payments. 7 Maeda, S. (2005). Regulations on electronic money. In The First Subgroup of the Study Group on the Financial System of the Japanese Bankers Association (Zenginkyo), E-money legislation (pp.48-67). Tokyo: Zenginkyo. 8 Sugiura, N., & Kataoka, Y. (2003). Future Electronic Money and its legal infrastruc- ture (p.38). Retrieved March 15, 2007, from http://www.fsa.go.jp/frtc/seika/discus- sion/2003/20030828-2.pdf 9 The Chairman Memorandum; Iwahara, S. (2003). Electronic payment and legislation (pp.597, 599). Tokyo: Yuhikaku. 10 Morishita, T. (2005). Electronic money in U.S. and Europe. In The First Subgroup of the Study Group on the Financial System of the Japanese Bankers Association (Zengin- kyo), E-money legislation (pp. 18-47). Tokyo: Zenginkyo. 11 Ms. Hiramatsu is the former chief of the UHVHDUFKRI¿FHRIWKHSODQQLQJGLYLVLRQRI the planning and coordination bureau of the Financial Services Agency. Hiramatsu, M. (2006). The urgency of protecting electronic money users: Issues of prepaid electronic payment on the Internet. Kinyu-zaisei-jijo, 2708, pp.18-21. Tokyo: Kinzai. 12 Mr. Kodaira is the chief of the electronic payment service division in the innovative ¿QDQFLDOV\VWHPVGHSDUWPHQWRI177&RP- munications Corporation that issues Elec- WURQLF0RQH\XQGHUWKHQDPHRI³&KRFRP´ Kodaira, Y. (2006). The urgency of protecting electronic money users: Japanese government has to develop legislation in anticipation of electronic money issuer’s bankruptcy.” Kinyu-zaisei-jijo, 2708, pp.22-25. Tokyo: Kinzai. 13 Chairman Memorandum; Kanda, H. (2005). 7KHDQDO\VLVRIWKH¿UVWDQGVHFRQGHOHFWURQLF m o n e y r o u n d - t a b l e c o n f e r e n c e r e p o r t s . I n T h e First Subgroup of the Study Group on the Financial System of the Japanese Bankers As- sociation (Zenginkyo), E-money legislation (pp. 6-17). Tokyo: Zenginkyo; and Financial Supervisory Agency. Points of concern for ¿QDQFLDOVXSHUYLVRU\HWFJXLGHOLQH3 rd book, 5-1-1(1). Retrieved December 9, 2006, from http://www/fsa/go.jp/guide/guidej/kaisya/ k005.hrml 14 Please see 4.3.2 and 4.3.3 for details on these regulations. Iwahara, S. (2005). The ideal future of regulations on electronic money. In The First Subgroup of the Study Group on the Financial System of the Japanese Bankers Association (Zenginkyo), E-money legislation (pp. 68-76). Tokyo: Zenginkyo. 15 Iwahara, S. (2003). Electronic payment and legislation (p.594). Tokyo: Yuhikaku. 16 When providing service available in only one municipality, the capital must be not less than 10 million yen. 17 Iwahara, S. (2005). The ideal future of regulations on electronic money. In The First Subgroup of the Study Group on the Financial System of the Japanese Bankers Association (Zenginkyo), E-money legislation (pp. 68-76). Tokyo: Zenginkyo. 18 Maeda, Y. (2005). Ideal future legislation on electronic money. In The First Subgroup of the Study Group on the Financial System of the Japanese Bankers Association (Zengin- kyo), E-money legislation (pp. 1-5). Tokyo: Zenginkyo. See also Iwahara, S. (2003). . buying items from sale candidates, and selling them to purchase candidates, and so forth. 2547 The Regulation of New Forms of Electronic Fund Transfers in Japan Focusing on Electronic Money Possibility. authorities. E.U. and Japan In Directive 2000/46/EC of the European Parlia- ment and of the Council of September 18, 2000 on the taking up, pursuit of, and professional supervi- sion of the business of electronic. Regulation of New Forms of Electronic Fund Transfers in Japan Focusing on Electronic Money engaging in other businesses, initial and ongoing capital requirements, and limitations on invest- ments.