• Japanese Regulator Is Interested in NFTs and IEOs as it Looks to Expand Crypto Regulation

  • The Financial Services Agency (FSA) of Japan appears to be getting closer to enacting a slew of new crypto regulations, with new policy documents indicating the agency will begin policing the non-fungible token (NFT) and initial exchange offering (IEO) sectors.

    ULTCOIN365 reported in July on the formation of a new FSA “study group” tasked with determining how to “deal with digital and decentralized finance (DeFi) and other matters” – including NFTs and central bank digital currencies (CBDCs).

    Since it began policing the crypto sector in September 2017, the FSA has convened “study groups” comprised of regulators, legal experts, top academics, and crypto sector professionals on a regular basis. These groups then forwarded their recommendations to the agency, which almost always followed through on the majority of them with new legal amendments and guidelines.

    Now, the FSA has stated that it will look to regulate companies that work with NFTs as part of its official plan for the remainder of the current fiscal year.

    Although the document did not go into detail about what the FSA intends to do about NFTs, DeFi, CBDCs, and IEOs, the fact that they were mentioned at all indicates that they are on the FSA’s agenda. It mentioned the need for a “framework” of regulation for the sectors.

    The FSA plan stated:

    “Cryptoasset exchange firms have started new operations with NFT-related business and IEO innovation. Their new operations include business areas that are not covered by [traditional] exchange business remits. A [regulatory] model that strikes a balance between [industry growth] and user protection may be required.”

    The FSA will most likely wait until the study group’s full report is received before preparing its own policy documentation. This is likely to elicit a response from self-regulating bodies representing cryptocurrency exchanges, and the FSA will eventually request that the government make the necessary legal changes.

    Larger Japanese corporations will be keeping a close eye on the situation: As previously reported, a number of Japan’s largest technology and finance firms have a stake in the NFT and IEO game. Line, the chat app operator, and Rakuten, the e-commerce behemoth, are both looking to expand into the space with new marketplace offerings.

    The firms’ main rival, the crypto-savvy SBI Group, also has significant security token offering (STO) ambitions – STOs are another area that the FSA may seek to address with its new guidelines.

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