A formal proposal has been submitted to the US Securities and Exchange Commission’s (SEC) Crypto Task Force by the Asia Web3 Alliance Japan. This document advocates for the establishment of a collaborative regulatory partnership between Japan and the United States to promote tokenization and the development of web3 technologies.
Dated March 25 and directed to Commissioner Hester Peirce, the proposal emphasizes the need for a unified effort to lessen regulatory ambiguity, synchronize legal frameworks, and create inclusive digital asset markets.
The initiative aims to foster a structured partnership between the SEC and various Japanese authorities, including the Financial Services Agency (JFSA), the Ministry of Economy, Trade and Industry (METI), and the Bank of Japan (BOJ). The goal is to develop shared standards for tokenized assets and blockchain innovation.
The submission underlined that the absence of legal clarity and interoperability across jurisdictions still poses a major obstacle to the sustainable expansion of tokenized economies in both countries.
Hinza Asif, the President of the Asia Web3 Alliance, remarked:
“Tokenization will be a fundamental pillar of future economies. It is our responsibility to collaboratively create a safe, innovative, and inclusive digital financial ecosystem.”
Industry concerns
The proposal identifies several issues facing Japanese web3 startups, particularly the lack of a clear classification system for tokens.
Numerous projects find it challenging to ascertain whether their assets fall under securities, commodities, stablecoins, or utility tokens, which significantly heightens compliance risks.
Furthermore, the lack of a defined regulatory pathway for token offerings has complicated the efforts of emerging companies to launch products domestically or to pursue international expansion.
While Japan is taking steps to evolve its digital asset policy landscape, the alliance points out that regulatory guidance continues to be fragmented and excessively burdensome.
Startups are faced with inconsistent tax treatment and redundant legal assessments, which often result in delays and increased operational expenses. Additionally, the lack of regulatory reciprocity prevents many firms from engaging with the US market, limiting their access to capital and strategic partnerships.
Core objectives
To tackle these challenges, a US-Japan Tokenization and Web3 Regulatory Collaboration Program has been proposed.
This initiative would prioritize crafting a unified token classification framework that allows both governments to consistently define categories like “tokenized securities,” “utility tokens,” and “non-security digital assets.” It also suggests guidelines for distinguishing between native digital assets and traditional financial instruments issued through blockchain technology.
A key element of the proposal is the push for regulatory interoperability. The alliance is advocating for mutual recognition of compliant tokenized offerings, enabling cross-border issuance with reciprocal disclosure requirements.
To nurture early-stage innovation, the proposal puts forth the introduction of a safe harbor mechanism in Japan, modeled after discussions within the SEC. This framework would allow startups to operate in a supervised sandbox environment with a clear route to compliance.
Shared standards
The proposal highlights the importance of developing shared standards for token trading and custody. It urges regulators to establish a common framework for licensed custodians and trading platforms, facilitating the listing and transfer of tokenized assets recognized in both markets.
Additionally, it advocates for the establishment of a bilateral web3 regulatory roundtable to maintain ongoing discussions, share policy updates, and coordinate collaborative research efforts.
As a follow-up step, the alliance is seeking to schedule a virtual planning session with the SEC’s Crypto Task Force and relevant agencies in Japan to kick-start the dialogue.
It also encourages the creation of a joint working group composed of legal and policy experts to map out regulatory gaps and shared interests between the two nations.
In an experimental phase, the alliance proposes selecting a number of US and Japanese startups to take part in a cross-border sandbox aimed at testing compliant token issuance under the new framework.
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