How the FSA supports “New Capitalism”
The Japanese Cabinet decided in June 2022 on its “Basic Policy for Economic and Fiscal Management and Reform”, also commonly referred to as Kishida’s “New Capitalism”.
As part of its efforts to solve social issues, “New Capitalism” promotes multi-polarization and regional revitalization. It recognizes a growing movement to create a decentralized digital society, in which users will create new value through the management and utilization of their own data, based on a more decentralized and reliable Internet, and the spread and expansion of digital assets on blockchains.
We will advance efforts to refine functions and international standardization toward the realization of the “Trusted Web”. In addition, we will consider improving the environment for promoting Web 3.0, such as using NFTs and DAOs, based on blockchain technology. Furthermore, in order to expand the use of content, including the Metaverse, we plan to submit related bills to the 2023 ordinary session of the Diet. In order to promote Fintech, we will develop a system for funding with security tokens (digital securities), relax screening standards for crypto-assets while considering user protection, and create interpretation guidelines for crypto assets as a means of payment.
The FSA, like other ministries and government agencies, then took this framework policy and developed it further into its own “Policy for Financial Administration”, published at the end of August.
Realization of a digital society
Financial services that utilize new technologies such as smartphones, APIs, and artificial intelligence (AI) are beginning to play an important role as infrastructure for people’s lives, including in the field of payments, and are expected to further develop along with the digitization of society.
In order to further promote these movements, the FSA has restructured its organization and integrated the innovation promotion department with the monitoring department, with the aim to promote cutting-edge innovation in Web 3.0, etc., through multifaceted efforts such as an improved regulatory framework, business support, and surveys and research, in cooperation with domestic and international counterparts (see the graphic in the title).
Efforts related to digital money, crypto assets, etc.
In recent years, movements toward further development of the Internet, such as Web 3.0 and the Metaverse, are progressing around the world. In order to promote such movements in Japan as well, the Financial Services Agency will take the following measures:
- First, following the enactment of the revised Payment Services Act in June 2022, we will steadily implement and operate the so-called stablecoin system (please see our article on “Japan’s Framework for Crypto-assets and Stablecoins”).
- In addition, we will streamline the pre-screening by self-regulatory organizations for crypto-assets handled by crypto-asset exchange service providers, and
- Clarify the interpretation of crypto-assets eligibility.
- Also, we will develop a system to deal with issues related to taxation on the portion of crypto assets (including so-called governance tokens) held by issuers (please see our article on the “Japan FSA requests revision of corporate crypto taxation”) , and
- Enable entrustment of crypto assets (custody business) by trust banks.
- Lastly, we will work to improve the environment for PTS trading of securities tokens, continuously consider decentralized finance, grasp the latest technology trends, and strengthen external communication.
In light of the growing turmoil in the crypto asset market around the world, the Financial Services Agency (FSA) will take advantage of its experience in developing and monitoring systems related to crypto assets and take the lead in the world. We will continue to contribute to policy responses.
Regarding the central bank digital currency (CBDC), the Bank of Japan completed the proof-of-concept for basic functions in March 2022, and moved to the proof-of-concept phase for peripheral functions in April of the same year. In light of this, the FSA and the Ministry of Finance will work together to contribute to this study from the perspective of the impact on financial institutions.
Source: FSA, Study Group on Digital & Decentralized Finance, Secretariat Materials
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