Japanese Regulator Report Suggests DeFi Regulations Could Be Coming


The Financial Services Agency has published a report about DeFi and blockchain. Its authors concluded that the country may need to create regulations in the area of decentralized finance.

The report came second from FinTech Innovation Hub. It was created in 2018 by the FSA per Coin Post. Although the group is not intended to create policy, its main purpose is to identify new business opportunities and trends in fintech and blockchain. However, the report will likely influence the thinking of policy-makers at the FSA.

The main purpose of the report is to summarize developments and meetings in Japan over the past few weeks – providing regulators with a quick overview of key meetings.

The group claimed it was “proceeding in discussions and document formulation” within the DeFi space and that regulators need to learn more about community trends and development of DeFi technology, governance mechanisms, and the prospects of further decentralization.

The paper’s authors stated that future regulations would be likely to be imposed, and that the FSA was still discussing the issue. They also stated that regulatory discussions were ongoing in the FSA, as well as in DeFi.

The FSA has stated its position on DeFi as follows:

Blockchain technology can be used to create a decentralized financial system that allows peer-to-peer financial transactions. No intermediaries are required. This type of decentralized financial system could offer many benefits and opportunities, but it could also hinder [policy-makers] ability to enforce existing regulations.

In 2017, the FSA started policing crypto. Japan was the first country to implement a permit-based system. In the wake of the Cryptocheck hack in early 2018, the agency has tightened its oversight of the sector and holds regular policy-making sessions, often including members of the crypto and domestic blockchain industries.

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