White Paper

Abstract

This project proposes the insurance of JPY-pegged stablecoin as a prepaid payment method under the Fund Settlement Law. In recent years, payment with crypto assets such as Bitcoin and Ether became widely accepted. However, real-world applications of such payments encountered numerous problems due to the volatile nature of said currencies. Although JPY-pegged stablecoins are issued in Japan, their user base is primarily located within Japan, undermining the advantages of crypto assets in the global market. As a result, we will widely issue the JPY-pegged stablecoin “JPYW (World)” to the global market, as a prepaid payment method, hence gapping the bridge between crypto-assets and the real economy.

1　Project Motivations

1.1　The Barrier between Crypto and Real-World Assets

As a P2P electronic currency system, Bitcoin was born in 2008, to enable direct payment between users with blockchain technology, without the intervention of financial institutions. In reality, the volatility, low payment speed, and high payment fees make Bitcoin payments far from ideal. With ever-increasing commodity prices, it is clear in some cases, that Bitcoin is not meant to be a valid payment method. Since then, discussions regarding payments using blockchain technology erupted worldwide, and answers came in from all fronts. Among them, the invention of stablecoin, with the linkage of crypto value and fiat currency in mind, paved the way to a better solution that counters the volatility of crypto assets.

Stablecoins are generally issued on the Ethereum network as ERC20 tokens. However, current Stablecoins such as USDT, issued by Tether, are usually USD-pegged. And this is quite inconvenient for Japanese users. Therefore, in this project, we will issue the JPY-pegged stablecoin JPYW as a prepaid payment method under the Fund Settlement Law, which will eliminate the “unsuitable for social use” barrier faced by crypto-assets and current stablecoins.

1.2　The Barrier Among Nation Borders

Crypto assets are borderless. Compared to traditional systems, crypto-assets can be freely deposited and transferred with a personal crypto wallet, both quick and cost-efficient. However, traditional crypto assets such as Bitcoin are still prone to the risk of price fluctuations, as well as additional problems when circulating in the real world.

On the other hand, the value of the crypto asset market is estimated to reach 340 trillion yen at the end of 2021, further boosting the number of token holders. As a JPY-pegged stablecoin, JPYW also meets the crypto assets needs for the global market, as a typical safe-haven currency.

1.3　The Barrier between the Present and the Future

In modern times, the way of money is slowly changing as well. With the advancement of a cashless society, commercial trades are occurring on the internet more frequently.

The trading market of NFT (Non-Fungible Tokens) based on contents such as digitized art, photography, video, and music, is expanding steadily. Soon, the trend of digitization and a cashless society will become inseparable from crypto assets.

Under such circumstances, JPYW opens up a new lifestyle of the future. As a stablecoin, JPYW will become a hub connecting the digital life of the present and the future.

2　The Solution of JPYW

2.1　Price Stabilization Mechanism

JPYW is a "private-owned prepaid payment method" under the Fund Settlement Law. We have the designed JPYW to be roughly 1 JPYW = 1 yen. Users are freed from the traditional risk of price fluctuations and are allowed to make payments with JPYW, a JPY-pegged stablecoin as a prepaid payment method.

The stabilization mechanism to allow JPYW to stay as such a payment method is explained as follows.

2.1.1　When 1 JPYW Falls below 1 Yen

On occasions, the price of 1 JPYW may fall below 1 yen on average for a prolonged period, due to reasons such as secondary distributions on a decentralized exchange. When this occurs, the price of JPYW will be increased by one of the following methods:

・Deposit to the Legal Affairs Bureau as stipulated in the Fund Settlement Law (deposit amount equals no less than 50% of the unused balance on the reference date).

・Receive financial institution guarantee as stipulated in the Fund Settlement Law. Initially, a cash pledge will be deposited to the Legal Affairs Bureau. In case the deposit amount increases in the future, users will be notified on the PassPay website and other media beforehand.

By doing so, it is believed that in the case of the bankruptcy of PassPay, the possibility of harm to the users will be greatly reduced. This however does not guarantee the protection of the principal JPYW issued or sold by the company.

2.1.2　When 1 JPYW exceeds 1 Yen

On occasions, the price of 1 JPYW may exceed 1 yen on average for a prolonged period, due to reasons such as secondary distributions on a decentralized exchange. When this occurs, the price of JPYW will be decreased by the following method:

・JPYW continues to be sold on the PassPay website

Nevertheless, if the circulation price in the secondary distribution exceeds 1 yen per JPYW, together with deposit amount exceeding that is stipulated by the Fund Settlement Law (hereinafter referred to as deposit surplus, including financial institution guarantee), announcements will be made on the company’s website before withdrawing the excessive deposits (total withdraw amount is determined so that the average secondary distribution price does not fall below 1 yen, within the range of 30% of total deposit amount or less), to prevent a decrease in fund efficiency.

2.1.3　When will the majority of the first batch of JPYW be released to the market

We are planning to issue 100 million JPYW on the first batch. Then a predetermined ratio of JPYW will be supplied. Details are described in 2.4.

2.1.4　When the token issuer abolishes the issuing business

If PassPay abolishes the business of issuing JPYW, the Company will refund the users at 1 JPYW = 1 yen under the Fund Settlement Law and other laws and regulations.

2.1.5　In case the Issuer Goes Bankrupt

If the issuer goes bankrupt, the user's holdings will continue to be recorded on the Ethereum blockchain despite that JPYW will no longer be available for purchase. The bankruptcy proceedings will take any leftover deposits to reimburse the users.

Under the Funds Settlement Law, it is obligatory for a private token issuer to pay and maintain a margin pledge to the Legal Affairs Bureau in accordance with the Fund Settlement Law. If PassPay were to go bankrupt, users will get a refund based on the refund procedure.

2.2　Legal Nature of JPYW

JPYW is a private-owned prepaid payment method issued by PassPay Co., Ltd., a company established under the laws of Japan. Since JPYW is a currency-denominated asset it does not fall under the category of crypto-assets under the Fund Settlement Law.

Currently, the DeFi (decentralized finance) market is expanding rapidly, and the decentralized exchange (DEX) has obtained a certain number of users. JPYW, an ERC20 token, can, although not recommended, be used for secondary trades through decentralized exchanges, etc.

2.3　 Use Cases Assumption

To purchase goods and services on our E-Commerce website

JPYW can be used to purchase goods and services on our E-Commerce website at the rate of 1 JPYW = 1 yen.

2.4　Amount of JPYW Issued

Up to 100 million JPYW will be issued in the first batch. When 90% or more of the issuance limit has been in circulation, additional JPYW will be issued in sequence. JPYW is an ERC20 token, and the contract address does not change with the issuing of additional JPYW.

3　How to Purchase JPYW

We currently recommend the following 2 methods:

・Purchase with Japanese yen from our website

・Purchase with crypto assets from our website (pending implementation)

You may purchase from our website at a rate of 1 JPYW = 1 JPY. If constant trades are made with the price well above or below 1 JPYW = 1 JPY, it is advised to cease trading until the cause can be identified.

4　Governance of JPYW

Important matters regarding the publication and distribution of JPYW will be decided based on the negotiation among the project supervisor and consolation team experts. The consolation team consists of lawyers, tax accountants, former crypto-asset exchange companies, and consultants, who will be sharing their expertise with the team.

5　About Us

Company Info

・Establishment: February 2022

・ Headquarters: 7-7-7 Roppongi, Minato-ku, Tokyo

・Capitalol: 10 million yen

・Business Scope

・Operation of company-owned E-Commerce Site / Issuance of prepaid payment methods

6　Disclaimer

There are certain risks involved in holding and using JPYW. Please be aware of the following risks in advance. In addition, PassPay will not be held liable for any damage caused to the users due to the following risks:

6.1　Risks related to the asset value of JPYW

According to the Fund Settlement Law, JPYW is issued as a private-owned prepaid payment method instead of a crypto asset. It is NOT a security / financial product under the Financial Instruments and Exchange Act or any other product of investment. Therefore, other than those purposes specified by PassPay, its usage such as payment between users, etc., is not guaranteed.

In addition, since JPYW is issued following standards of ERC20, it is possible to dispose of JPYW at various external services that accept tokens such as ERC20, although not recommended or guaranteed. Using external services as such is considered a personal act of JPYW users, and is under their own responsibility and authority.

6.2　JPYW loss risk due to loss of private key

Using JPYW requires a private key. Therefore, if the private key or the combination of the private key is lost, the JPYW is lost with it. The safe-keeping of the private key is the authority and responsibility of the users. If the private key associated with the wallet in which the JPYW of the user is stored is lost, it means the JPYW is lost as well. In addition, the devices on which wallet applications are installed can be compromised by malware, DoS, consensus-based, as well as other forms of attacks, to cause the loss of JPYW.

6.3　Risks related to protocols such as Ethereum

JPYW is issued under standards of ERC20, which is an Ethereum protocol. As a result, failures or malfunctions of the Ethereum protocol can have serious adverse effects on the JPYW held by the user, such as temporary unavailability. In addition, since a transaction fee (GAS fee) is required when trading on the Ethereum network to use JPYW, the transaction fee (GAS fee) may vary due to reasons unrelated to PassPay, such as congestion on the Ethereum network.

6.4　Risk of mining attacks

Similar to other cryptocurrency tokens based on public chain protocols, JPYW may be affected by mining attacks during verification when trading on the blockchain. This may pose a risk of falsification of transaction records related to JPYW.

6.5　Risk related to laws and regulation changes and taxation

Laws, government orders, decrees, regulations, orders, notifications, ordinances, guidelines, and other regulations and tax systems related to JPYW may be prone to change in the future. Therefore, the users should, under their own authority and responsibility, make decisions regarding the necessity of tax filing and other taxation regarding their JPYW.

6.6　Risks due to input errors by users and other factors

Unintended transaction results may occur due to erroneous user input, or any other user behavior, failed or corrupted operation status of communication or system equipment of users and third parties, natural disaster or cyber-attack as well as any other causes.

6.7　Relationships between users

The handling and resolving of transactions, communications, disputes, etc. that occur between the user or third parties related to our site shall be the user's responsibility, and we shall not be held responsible for such matters.

6.8　Risks due to the issuance of JPYW or suspension of distribution

We shall not be held responsible for any damage suffered by the user related to the suspension, termination, or modification of the issuance or distribution of JPYW, the deletion or loss of user messages or information, the cancellation of user registration, the loss of data due to the use of this service, the failure or damage of equipment, and other matters.

6.9　Supplementary Provisions

This white paper will be prepared and published on April 1, 2022.