The Financial Services Authority (FSA) of Japan has announced a partnership with the Monetary Authority of Singapore (MAS), aimed at jointly regulating and piloting cryptocurrency projects under the “Project Guardian” initiative. The project aims to test the feasibility of digital asset tokenization and DeFi applications while managing financial stability and integrity risks. The FSA will participate in observer capacity during the current phase of the pilot project.
Project Guardian
Established by MAS in May 2022, Project Guardian has four areas of focus, including open and interoperable networks, trust anchors, asset tokenization, and institutional-grade DeFi protocols. Many industry pilots are already underway, such as foreign exchange, fixed income, asset and wealth management. Notably, DBS Bank, JP Morgan, and SBI Digital Asset Holdings have conducted foreign exchange and government bond transactions against liquidity pools comprising tokenized Singapore Government Securities Bonds, Japanese Government Bonds, Japanese Yen (JPY), and Singapore Dollar (SGD).
Earlier this year, the Japanese prime minister expressed interest in leveraging DAOs and NFTs to support the country’s “Cool Japan” strategy as it explores Web3 usage. This collaboration follows a period of relaxation on crypto laws in Japan, exemplified by the National Tax Agency’s recent ruling to exempt token issuers from a 30% tax on unrealized capital gains.
Fintech Cooperation
This partnership continues a fintech cooperation framework established between the two regulators in 2017 to promote innovation in their respective markets. It also demonstrates that regulators recognize the importance of addressing emerging risks as the decentralized financial ecosystem continues to develop in complexity.