Japanese and Singaporean Regulators Collaborates to Conduct Crypto Pilot Tests

In an advanced announcement dated June 26, the Japanese Financial Services Authority (FSA) signed a partnership agreement with the Monetary Authority of Singapore (MAS) to conduct a pilot project for cryptos. The partners agreed to work on Project Guardian, an initiative in which the regulators will join efforts in regulating and piloting the project.

At the initial phase of the project, the regulators agreed that there would be limited participation. Firstly the market regulators will examine the FSA regulatory capacity.

FSA Collaborates with MAS

In a statement, the regulators stated that the main objective of “Project Guardian” is to examine the feasibility of emerging applications such as asset tokenization by conducting pilot trials. The report mentioned that FSA and MAS plan to mitigate risks that undermine financial stability and develop strategies to boost integrity.

The regulators will utilize data from fixed income, asset and wealth management, and foreign exchange in the industrial pilot phase. MAS reportedly launched Project Guardian in May 2022, aiming at experimenting the feasibility of applications in assets tokenization along with decentralized finance (DeFi) protocols. Earlier, the MAS had confirmed that the proposed tests would be conducted per the existing regulation.

Referring to the MAS report, Project Guardian is subdivided into four main categories, namely open and interoperable networks, asset tokenization, trust anchors, and institutional DeFi platforms. It was observed that Project Guardian would involve critical players in the private and public sectors.

Recently the MAS team engaged DBS Bank, SBI Digital Asset Holdings, and JP Morgan to conduct tests for foreign exchange and government bond transactions. The tests were conducted over a liquidity pool that involved tokenized Singapore Government Securities Bonds, Singapore Dollar (SGD), Japanese Government Bonds, and Japanese Yen (JPY).

Afterward, HSBC collaborated with UOB and Marketnode to conduct pilot trials for blockchain-powered products. On the other hand, the UBS group is conducting studies on ways to administer the issuance of Variable Capital Company assets on blockchain networks.

Scope of Project Guardian

In 2017 the MAS and FSA collaborated to launch a “fintech cooperation framework.” This initiative aimed at supporting the growth of innovation in Singapore and Japan through establishing robust fintech linkages and exploring new markets in the Asian region.

Notably, Project Guardian isn’t the first project MAS and FSA have partnered. A few days ago, the Japanese National Tax Agency (NTA) announced plans to exempt the token issuers from a 30% tax on unrealized profits on digital assets. Lately, Japanese policymakers have demonstrated a positive stance towards crypto and blockchain technologies.

Fumio Kishida, the Prime Minister of Japan, stated that the decentralized autonomous organizations (DAO) and the nonfungible token (NFTs) had massive potential to support the “Cool Japan” initiative. This project was under the national strategy aiming at leveraging Web3 technology to showcase Japanese culture and innovation.

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