Japan’s leading financial regulator, the Financial Services Agency (FSA), could be set up to enact new laws for police decentralized finance (DeFi) projects in the country. Accordingly, non-fungible tokens (NFTs) should also be targeted by these new regulations.

Japanese regulators can enact new laws for decentralized finance projects

The FSA has made an official announcement that it will set up a “study group” to explore ways to “solve digital and decentralized financial and other problems”. The agency added that the group will also consider ways to address the digitization of remittance systems and items related to digital securities.

The FSA added that it will review policies related to cryptocurrencies, as well as issues related to central bank digital currencies (CBDCs) and NFTs. The issue has become a pressing issue in both the public and private sectors in the past as the Bank of Japan is piloting CBDCs – and many private companies are launching their own CBDCs to anticipate future deals with CBDC.

The aim of the group is to “ensure adequate protection for users” while at the same time “promoting innovations in the private sector”, according to the agency.

NFT has also become a big deal in Japan, especially for creative people in the cultural sector. Several major crypto players, such as the Coincheck exchange, have started operating NFT markets.

While the research team has only authority to make preliminary recommendations to the FSA, its influence is second to none. The FSA has almost complete control over Japan’s cryptocurrency policy, and the team’s earlier insights have mainly led to changes in the country’s cryptocurrency policy.

However, the members of the team are not exclusively made up of managers and executives from the team – the team is also represented in the private sector. A senior executive of the large Japanese blockchain player LayerX and a senior executive from Sony were named among the members. A number of lawyers and academics were also involved.

The committee is chaired by Hideki Kanda, lawyer and professor emeritus at the University of Tokyo.

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