payments

Outline of the bill to partially amend the Payment Services Act

Norbert Gehrke

17 Mar 2025 — 5 min read

In response to the advancement of financial digitalization, and to ensure user protection while promoting innovation, it is necessary to:

subject certain fund transfers involving the movement of funds from domestic to foreign locations or from foreign to domestic locations (where a person who has been entrusted by a creditor receives funds from a debtor and transfers them to the creditor) to the regulations of fund transfer services;
establish domestic asset holding orders for crypto asset exchange service providers;
create electronic payment means and crypto asset service intermediary businesses;
and implement other measures.

Therefore, the Payment Services Act will be partially amended as follows.

Certain acts where a person who has been entrusted by a creditor receives funds from a debtor and transfers them to the creditor, involving the movement of funds from domestic to foreign locations or from foreign to domestic locations, shall be deemed to constitute foreign exchange transactions. (Article 2-2)

(1) Performance guarantee debt assumption contract

When a fund transfer service provider concludes a performance guarantee debt assumption contract (a contract stipulating that a qualified performance guarantor will assume the obligations related to the foreign exchange transactions of the fund transfer service provider to its users when a petition for commencement of bankruptcy proceedings is filed against said provider) for each category of fund transfer service it operates, and notifies the Prime Minister of this, the provider may be exempted from depositing all or part of the security deposit for the relevant fund transfer service. (Article 45-3)

(2) Performance guarantee contract

When a fund transfer service provider entrusts a qualified performance guarantor to conclude a performance guarantee contract (a contract stipulating that the qualified performance guarantor will guarantee the obligations related to the foreign exchange transactions of the fund transfer service provider to its users when a petition for commencement of bankruptcy proceedings is filed against said provider) with the users for each category of fund transfer service it operates, and notifies the Prime Minister that such contract has been concluded between the qualified performance guarantor and the users based on this entrustment, the provider may be exempted from depositing all or part of the security deposit for the relevant fund transfer service. (Article 45-4)

(3) Security deposit payment trust contract

When a fund transfer service provider concludes a security deposit payment trust contract (a trust contract stipulating that a trust company will manage trust assets and perform other necessary actions to achieve the purpose of using the trust assets for the payment of obligations related to the foreign exchange transactions of the fund transfer service provider to its users when a petition for commencement of bankruptcy proceedings is filed against said provider) with a trust company for each category of fund transfer service it operates, and notifies the Prime Minister of this, the provider may be exempted from depositing all or part of the security deposit for the relevant fund transfer service. (Article 45-5)

(4) Deposit order

When the Prime Minister deems it necessary for the protection of fund transfer service users' interests, they may order a fund transfer service provider who has concluded a performance guarantee debt assumption contract, or the counterparty to such contract, to deposit the performance guarantee debt assumption amount. (Article 46)

(5) Retrieval of security deposit

With regard to the security deposit for a specific category of fund transfer service, if the required deposit amount (the amount of security deposit that the fund transfer service provider must deposit) as of the immediately preceding reference date is less than the total amount of the performance guarantee debt assumption amount, the security deposit may be retrieved. (Article 47)

(6) Refund of security deposit

While creditors of obligations that a fund transfer service provider bears in relation to foreign exchange transactions for a specific category of fund transfer service have the right to receive payment from the security deposit for that category in priority over other creditors, qualified performance guarantors who have made payments of obligations based on performance guarantee debt assumption contracts or performance guarantee contracts and who are subrogated to such creditors pursuant to Article 499 of the Civil Code shall not have this priority right. (Article 59)

When the Prime Minister deems it necessary and appropriate for the public interest or user protection, they may order electronic payment means service providers and crypto asset exchange service providers to hold a portion of their assets, as specified by Cabinet Order, domestically. (Articles 62-21-2 and 63-16-2)

4. Establishment of electronic payment means and crypto asset service intermediary business

(1) Definitions

Necessary definitions, including "electronic payment means and crypto asset service intermediary business," shall be established. (Article 2)

(2) Introduction of registration system

① Persons registered with the Prime Minister may conduct electronic payment means and crypto asset service intermediary business (intermediating the sale and purchase of electronic payment means or crypto assets, or their exchange with other electronic payment means or crypto assets, on behalf of electronic payment means service providers or crypto asset exchange service providers based on their entrustment) without obtaining registration as electronic payment means service providers or crypto asset exchange service providers. (Article 63-22-2)

② Registration procedures, registration refusal requirements, etc., for electronic payment means and crypto asset service intermediary business operators shall be established. (Articles 63-22-3 through 63-22-9)

① Electronic payment means and crypto asset service intermediary business operators must implement necessary measures for information security management. (Article 63-22-10)

② Electronic payment means and crypto asset service intermediary business operators must implement necessary measures to protect users, such as providing information to users, and to ensure proper and reliable business operations. (Article 63-22-12)

③ Electronic payment means and crypto asset service intermediary business operators are prohibited from accepting deposits of money or other property from users in relation to their intermediary business. (Article 63-22-13)

④ Electronic payment means service providers who have entrusted electronic payment means intermediary activities and crypto asset exchange service providers who have entrusted crypto asset intermediary activities shall, in principle, be liable for damages caused to users by the electronic payment means and crypto asset service intermediary business operators to whom such activities were entrusted. (Article 63-22-14)

(4) Development of supervisory provisions

Supervisory provisions for electronic payment means and crypto asset service intermediary business operators shall be established, including preparation of books and records, preparation and submission of reports, on-site inspections, business improvement orders, revocation of registration, etc. (Articles 63-22-16 through 63-22-22)

Provisions related to certified payment service providers associations shall be established, stipulating that such associations shall provide guidance to electronic payment means and crypto asset service intermediary business operators to ensure their compliance with this Act when conducting their business. (Articles 88, 91, 92, and 97)

The requirement that trustees must manage the entire amount of money received under trust contracts as deposits shall be removed from the definition of specified trust beneficiary rights. Instead, requirements shall be established that the ratio of the amount managed as deposits to the total amount of such money must be above a certain level, and that amounts other than those managed as deposits must be invested in certain government bonds or other bonds. (Article 2)

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Outline of the bill to partially amend the Payment Services Act

Norbert Gehrke