Token Utilization Part 1: Differences from Points (Legal/Operational Perspective)

Introduction

"Tokens are basically just like points, right?"

This phrase always comes up in Web3 planning meetings. It is half correct and half a recipe for a major disaster. Even if they look similar, their legal treatment and what you can do with them after issuance are completely different.

Think of arcade tokens. Those tokens cannot be taken out of the arcade and are only valid inside that establishment. In fact, corporate points are the same kind of "inside-the-store-only world." On the other hand, a token is a medal that can be taken outside the store.

Why does this simple difference fundamentally change legal and operational aspects? The first installment of the "Token Utilization" series, which begins now, will organize this from the ground up. You can finish reading this article in one go, so those who are new to this are welcome to read it.

1. The difference is "whether it can go outside," that is everything

Points are issued by companies as benefits within their own services. The balance is known only to the company's database, and the rules can be freely decided by the company in their terms of service.

A token is a digital mark issued and managed on a blockchain (a transaction ledger shared by everyone). We will organize the differences along three axes.

① Can it be taken out?

Points are only within the issuing service. Tokens can be put into your own wallet (a digital wallet) and taken outside.

② Can it be given to others?

Points are generally non-transferable. Tokens can be sent to others, and some can be exchanged with strangers on exchanges.

③ Who holds the ledger?

The point ledger is managed solely by the company. The token ledger is on the blockchain, and even the issuing company cannot rewrite it as they please.

The moment a medal can be taken out of the store and exchanged with anyone, it is no longer just about "store rules." This is where legal discussions begin.

2. Legal perspective: The law determines the category by "nature," not by "name"

This is the most important point this time. Japanese law does not care at all whether you call it "points" or "tokens." It only looks at the nature of it. There are roughly four categories.

Category ①: Free bonus → Act against Unjustifiable Premiums and Misleading Representations

Points that come for free as a bonus for shopping fall here. As long as you are careful about the Act against Unjustifiable Premiums and Misleading Representations, which prevents excessive bonuses and misleading advertising, you can design them relatively freely.

Category ②: Charged with money → Prepaid Payment Instruments (Payment Services Act)

The type where users pay money to charge is a "prepaid payment instrument" under the Payment Services Act. Similar to Suica or book cards, if the unused balance on the reference date (end of March/end of September) exceeds 10 million yen, an obligation arises to deposit at least half of that amount to protect the funds held.

Box 3: Can be exchanged with unspecified persons → Crypto assets

If it can be used for exchanges and payments with anyone outside, it is a "crypto asset." To make buying, selling, or exchanging a business, registration as a crypto asset exchange service provider is required. The "major accident" mentioned at the beginning is exactly this; operating without registration is subject to criminal penalties. The amendment in July 2026 also strengthened penalties for these unregistered operators.

Box 4: Promise of profit distribution → Securities (Financial Instruments and Exchange Act)

If you promise that "if you hold this, you will receive a share of the profits," it enters the world of the Financial Instruments and Exchange Act as a type of stock (security token).

💡 In July 2026, the rules for Box 3 changed significantly

An amended law was enacted in July 2026, and it was decided that the regulation of crypto assets would shift from the Payment Services Act to the Financial Instruments and Exchange Act. The treatment of tokens will change from "means of payment" to "financial products similar to stocks," and investor protections such as insider trading regulations will be put in place (the new system is expected to start during 2027).

⚠️ Do not issue based on your own judgment

Which box your company's project falls into cannot be judged by the intuition of the person in charge. In particular, the boundary between Box 2 and Box 3 changes based on detailed design, such as how it is charged and the scope of what can be exchanged. Before deciding to issue, please consider it a set requirement to have a lawyer or other expert review the blueprint.

3. Deep Dive: The Invention of "Tokens That Are Not Crypto Assets" ── FiNANCiE

There is a Japanese case that actually pulled off the idea that "the box is determined by design."

FiNANCiE is a service where many sports clubs, including Shonan Bellmare in soccer, and regional projects issue "community tokens." You can buy them from 100 yen with a credit card, and there is no need to create a wallet or purchase crypto assets. Depending on the amount of tokens held, you can participate in voting projects and exclusive benefits.

What is interesting is its legal status. FiNANCiE's terms of service explicitly state that community tokens are neither securities, prepaid payment instruments, nor crypto assets.

Why is that possible? The answer is design. These tokens cannot be taken out to external wallets and only circulate within the FiNANCiE service. In other words, by using blockchain technology but intentionally creating them as "medals that cannot be taken out of the store," they avoid falling into the heavy box of crypto assets.

On the other hand, the token called FNCT issued by the same FiNANCiE company is a genuine crypto asset that can be bought and sold on external exchanges. The same company is creating both "tokens that go outside" and "tokens that do not" depending on the purpose.

However, just because they cannot be taken outside does not mean the price is fixed. Community tokens are also bought and sold at market prices within the service, and the price fluctuates.Not falling into the crypto asset box and having a stable price are two different things.

Whether it is a token or a point is determined by design, not technology.
This is the one sentence I want you to take away most from this article.

4. Operational Perspective: Can it be "changed" after issuance?

After legal matters comes daily operation. The dividing line is whether control remains after issuance.

1. Can you control the value?

The value of points is a fixed rate determined by the company and does not fluctuate in the market. Names and rules can also be changed at the company's discretion (even large-scale changes are possible, such as when T-Points were integrated and renamed to V-Points). Once a token is released into the market, no one can control its price.

② Can the design be corrected later?

Points can have their expiration dates and revocation rules changed through revisions to terms and conditions. Token records remain on the blockchain, making recovery or correction extremely difficult. Moreover, if the price drops, it leads directly to dissatisfaction among holders. The composition of the backlash discussed in NFT benefit design occurs on an even larger scale with tokens.

③ Tax treatment

When using points for daily shopping, there are almost no situations where you need to be conscious of taxes. Tokens are subject to taxation if a capital gain is realized. In other words, there are situations where the recipient must also file a tax return. The distributor has a responsibility to inform them from the start that "this is something that may be subject to taxes."

💡 A simple guide for choosing between them

Use points for rewarding and retaining your own customers. Use tokens if you want to involve fans and external parties to create an economic zone where value circulates. As an intermediate solution, there is also the option of a FiNANCiE-style "non-transferable token." Thinking in terms of these three choices makes the design clear.

Summary

• The difference between points and tokens is "whether they can go outside." They are divided by three points: portability, transferability, and bookkeeping.

• The law determines the category based on nature, not the name. Bonus → Act against Unjustifiable Premiums and Misleading Representations, Charge → Prepaid Payment Instruments, Exchange outside → Crypto Assets, Profit distribution → Securities.

• It has been decided that crypto assets will move to the Financial Instruments and Exchange Act with the amendment in July 2026. Penalties for unregistered business operations have also been strengthened.

• FiNANCiE avoids the crypto asset category with a "non-transferable design." Whether it is a token or a point is determined by design, not technology.

• The turning point in operation is whether it can be changed after issuance. Tokens cannot be controlled in terms of value, design, and taxes.

• Think of the choice in three ways: Points / Non-transferable tokens / Transferable tokens.

Keywords for this session

Token
A digital mark issued and managed on a blockchain. It can be sent or exchanged with others, and some have prices in the market.

Act against Unjustifiable Premiums and Misleading Representations
A law that prevents excessive product bonuses (premiums) and exaggerated representations. It relates to the design of points that can be received for free.

Prepaid Payment Instruments
A payment method where you pay in advance to charge and use. Under the Payment Services Act, preservation (deposit) of unused balances is required.

Crypto Asset
Digital property value that can be used for payment or exchange with unspecified people. Registration is required to conduct exchange as a business.

Payment Services Act
A law that establishes rules regarding the exchange of money. It has handled prepaid payment instruments and crypto assets to date.

Financial Instruments and Exchange Act (FIEA)
A law that establishes trading rules for financial products such as stocks. With the amendment in July 2026, it was decided that regulations for crypto assets would also be moved under this law.

Security Token
Tokens with characteristics similar to stocks or corporate bonds that promise profit distribution, etc. The rules of the Financial Instruments and Exchange Act apply.

Community Token
Tokens issued by clubs or projects for fans. Those on FiNANCiE are designed to circulate only within the service and do not qualify as crypto assets.

Conclusion

Whether or not to take the medals outside the store. That design boundary determined both the applicable laws and the degree of freedom after issuance. Next time, in 'Token Utilization 2: Incentive Design (Overdoing It Can Be Fatal),' we will delve into what can actually be done with tokens. Stay tuned for the next installment!