Japanese and Singaporean Regulators Partner for Crypto Pilot Project, Testing Digital Technologies and Mitigating Risks

Japan’s Financial Services Authority (FSA) and Singapore’s Monetary Authority of Singapore (MAS) have formed a partnership to jointly regulate and test cryptocurrency projects as part of MAS’s “Project Guardian” initiative. The FSA will initially participate as an observer in the project. The collaboration aims to explore the viability of digital technologies like asset tokenization and decentralized finance (DeFi) while effectively managing potential risks to financial stability and integrity. Ongoing pilot experiments cover areas such as fixed income, foreign exchange, and asset and wealth management. Project Guardian, which was launched by MAS in May 2022, focuses on four key aspects: open and interoperable networks, trust anchors, asset tokenization, and institutional-grade DeFi protocols. Notably, a pilot project within the initiative involved DBS Bank, JP Morgan, and SBI Digital Asset Holdings conducting foreign exchange and government bond transactions using tokenized Singapore Government Securities Bonds, Japanese Government Bonds, Japanese Yen (JPY), and Singapore Dollar (SGD).

This collaboration builds on a previous joint fintech cooperation framework established by the FSA and MAS in 2017 to drive innovation in their respective markets. It follows recent relaxations of crypto regulations in Japan, with the country’s National Tax Agency exempting token issuers from a 30% tax on unrealized capital gains. Japanese Prime Minister Fumio Kishida has also expressed interest in leveraging decentralized autonomous organizations (DAOs) and nonfungible tokens (NFTs) to support the government’s “Cool Japan” strategy as it explores the utilization of Web3 technologies.