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On June 26, Japan’s financial regulator, the Financial Services Authority (FSA), announced a partnership with the Monetary Authority of Singapore (MAS) to co-regulate and pilot-test crypto-currency projects in line with the latter’s “Project Guardian” initiative. Participation will be limited to the number of FSA observers at the current stage. Regulators wrote:
“The project aims to test the feasibility of applying digital technologies such as asset tokenization through pilot experiments while managing risks to financial stability and integrity. Current industry pilots include fixed income, foreign exchange, and asset and wealth management.”
Launched by MAS in May 2022, Project Guardian aims to test the “applicability of asset tokenization and DeFi” in accordance with the proper regulations. The project has four main areas; open and interoperable networks, trust anchors, asset tokenization, and institutional grade DeFi protocols. In one notable initiative project:
“DBS Bank, JP Morgan and SBI Digital Asset Holdings conducted foreign exchange and government bond transactions in liquidity pools consisting of tokenized Singapore government securities, Japanese government bonds, Japanese yen (JPY) and Singapore dollar (SGD).”
Meanwhile, HSBC, Marketnode, and UOB have since completed pilot testing of a blockchain-structured product, while UBS is exploring the possibility of issuing Variable Capital Company funds on digital asset networks. Project Guardian is not the first collaboration between FSA and MAS. In 2017, the two regulators created a joint fintech cooperation framework to promote innovation in their respective markets.
The collaboration also follows a period of relaxation of crypto laws in Japan. On June 25, it was reported that the National Tax Agency of Japan decided to exempt token issuers from a 30% tax on unrealized capital gains. Earlier this year, Japanese Prime Minister Fumio Kishida said the DAO and NFT could help support the government’s “Cool Japan” strategy as it explores the use of Web3.