Japan in recent years has been at the bleeding edge of blockchain technology development and regulations, driven in part by large-scale hacking incidents affecting Japanese exchanges.
As reported by Forbes, the country has since established clear laws governing crypto businesses and started incubating blockchain innovations through a unique regulatory sandbox system under the Cabinet Secretariat.
The Japanese government launched the sandbox regime in June 2018 as part of plans to accelerate the introduction of new business models and innovate technologies.
Both foreign and domestic firms and organizations are able to demonstrate as well as experiment with new technologies including blockchain, artificial intelligence (AI) and Internet of Things (IoT) in areas such as financial services, healthcare and transportation.
Sandbox experiments also take place in virtual spaces, rather than being limited geographical regions like Japan’s National Strategic Special Zones. Sandboxes are necessary to assess whether a new business will work in the real market, after which the government can introduce deregulation measures. This makes the sandbox system a key component under the nation’s Abenomics economic reform program.
Since launching in 2018, the sandbox has approved six projects for experimentation involving a wide range of business applications. These include an IoT trial by Panasonic that tested household appliances through existing power cables, and a collaboration between security company Caluis Inc and Kansai Electric Power Company to detect unauthorized openings of online bank accounts.
The sandbox is also facilitating cryptocurrency and fintech developments. Tokyo-based cryptofinance company Crypto Garage, which focuses on developing trustless financial services, is currently studying how to improve settlements between digital currency exchanges.
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