- June 28, 2023
- Posted by: [email protected]
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Japanese and Singaporean regulators have recently joined forces to collaborate on a pilot project focused on cryptocurrency. The Financial Services Authority (FSA) of Japan and the Monetary Authority of Singapore (MAS) announced their partnership on June 26 as part of MAS’s “Project Guardian” initiative. The FSA’s involvement in the project will initially be in an observer capacity.
The purpose of the project is to explore and test the feasibility of digital technologies, particularly asset tokenization and decentralized finance (DeFi) applications, while ensuring the management of risks to financial stability and integrity. The current pilot experiments encompass various sectors such as fixed income, foreign exchange, and asset and wealth management.
MAS initiated Project Guardian in May 2022 with the aim of examining the practicality of asset tokenization and DeFi applications within a regulatory framework. The project focuses on four key areas: open and interoperable networks, trust anchors, asset tokenization, and institutional-grade DeFi protocols. As part of the initiative, notable projects have already been undertaken, including foreign exchange and government bond transactions conducted by DBS Bank, JP Morgan, and SBI Digital Asset Holdings using tokenized Singapore Government Securities Bonds, Japanese Government Bonds, Japanese Yen (JPY), and Singapore Dollar (SGD) liquidity pools.
In addition to this collaboration, other financial institutions have been actively involved in exploring blockchain-based solutions. HSBC, Marketnode, and UOB recently completed a pilot test of a blockchain-structured product, while UBS is investigating the issuance of Variable Capital Company funds on digital asset networks.
This joint effort between the FSA and MAS is not their first collaboration. In 2017, the two regulators established a fintech cooperation framework aimed at promoting innovation in their respective markets.
Furthermore, this collaboration comes at a time when Japan has been relaxing its regulations related to cryptocurrencies. Recently, the National Tax Agency of Japan announced an exemption for token issuers from a 30% tax on unrealized capital gains. The Japanese government has also shown interest in decentralized autonomous organizations (DAOs) and non-fungible tokens (NFTs), recognizing their potential in supporting the country’s “Cool Japan” strategy and exploring Web3 applications.
