Japan May Need To Develop Decentralized Financial (Defi) Sector Regulations

Japan’s leading cryptocurrency and financial sector regulator, the Financial Services Agency (FSA), has released a report on DeFi, blockchain and cryptocurrency in which its authors argue that the country may need to develop regulations for the decentralized financial sector (Defi).

Japan May Need To Develop Decentralized Funding Regulations (Defi)

According to Coin Post, this is the second report from the FinTech Innovation Hub, a working group founded by the FSA in 2018. Although the team’s main goal is to identify new business avenues and trends in the fintech and blockchain space rather than creating guidelines, the report still has the potential to sway regulators’ thinking.

The report summarizes the developments and meetings that have taken place in Japan over the past few months and provides summaries of key meetings for quick access by managers.

However, the team wrote that it is “conducting discussions and construction documentation” in the DeFi area and stated that regulators should know more about community trends, the development of DeFi technology, governance and prospects for further advancement of decentralization in the area.

In addition, the paper’s authors also said that “future regulations” are likely to apply and that space discussions are taking place within the FSA. They added that these regulatory discussions are taking place not only in the context of DeFi discussions but also in the broader cryptosphere, including the crypto-custody sector.

As such, the FSA stated its stance on DeFi:

“A decentralized financial system based on blockchain technology has the potential to enable peer-to-peer (P2P) financial transactions without the need for intermediaries. While this type of decentralized financial system can offer many opportunities and benefits, it can also undermine the ability of policy makers to enforce existing regulations. “

The FSA began regulating the crypto sector in earnest in 2017 when Japan became one of the first countries in the world to introduce a license-based system for crypto exchange operators. Since then, following the Coincheck hack in early 2018, the agency has stepped up its clout in the sector and holds regular policy making sessions, often involving members of the country’s blockchain and cryptocurrency industry.

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