Japan's Financial Services Agency recently announced plans to cooperate respectively with the UK's Financial Conduct Authority and the Monetary Authority of Singapore for the purpose of promoting fintech innovation. The collaboration is intended to reduce regulatory uncertainty and time to market, remove barriers to entry in the respective jurisdictions and otherwise further encourage innovation. Press releases issued by the regulators detailing the frameworks can be found here: Japan & UK cooperation and Japan & Singapore collaboration.

The frameworks

Under the respective cooperative frameworks, the regulators have agreed to:

  • refer to each other innovative businesses that wish to enter the other market; and
  • share information on innovations in the financial services sector in their respective markets.

Referral systems

Under the referral systems the referring regulator will refer to the other regulators businesses that it has identified as innovative and warranting support from its fintech-promotion function. The relevant business will then be given priority access to the fintech-promoting function of the referral-receiving regulator. In practice, businesses referred by either of the FCA or the MAS will be given access to the JFSA's FinTech Support Desk, while businesses referred by the JFSA will gain access to the FCA's Project Innovate or the MAS's Financial Technology & Innovation Group (as applicable).

Referred businesses will each be matched with a dedicated team or contact at the relevant regulator's fintech-promotion function. This contact will provide guidance on the applicable regulatory regime and assist with the relevant processes involved in becoming authorized to engage in regulated financial services. Referred businesses may also benefit from consideration for specialized authorization procedures possibly including, for example, flexible timetables.

Information sharing

Through the information sharing arrangements, the participating regulators will exchange information on innovations in the financial services sector. Contemplated areas of focus include emerging market trends and developments as well as pertinent regulatory issues.

Outlook

With the implementation of the cooperative frameworks, eligible businesses from the UK and Singapore will benefit from improved interoperability in expanding to Japan, while eligible businesses from Japan will benefit from a head start in the UK and Singapore. Going forward, businesses in Japan, Singapore and the UK will be best-positioned for attaining eligibility under the cooperative frameworks by improving their relationships with regulators in their home jurisdictions.

The sharing of information among regulators stands to improve prospects in relation to the applicable regulatory environments and, more broadly, their associated market potential. Also of note is that, as Japan has yet to establish a regulatory sandbox (in contrast to Singapore and the UK), it will especially benefit from information to be shared on market developments and regulatory best practices.