Japan's ruling Liberal Democratic Party is moving to overhaul rules on decentralised finance, stablecoins and prediction markets, drawing on U.S. cryptocurrency policy and financial market trends. It argues that clearer regulation and legal guarantees of rights for digital assets are needed to boost the competitiveness of the blockchain industry.

CoinPost reported on Oct. 27 that the LDP's parliamentary league promoting blockchain held its 37th meeting that day to discuss findings from an August trip to the United States and directions for improving Japan's financial regulation.

The trip included lower house lawmakers Masaaki Taira (平将明) and Junichi Kanda (神田潤一), as well as officials from the Japan Blockchain Association (JBA). They visited the U.S. Treasury Department, the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), JPMorgan, and prediction-market operators Kalshi and Polymarket.

JBA President and CEO Yuzo Kano (加納裕三) said U.S. authorities showed an attitude of supporting technological innovation while emphasising anti-money laundering and investor protection. He also said SEC Commissioner Hester Peirce said ensuring access to financial products is also investor protection.

Discussions on introducing prediction markets also continued. While the U.S. CFTC treats prediction markets as a derivatives market based on event contracts, concerns were raised that they could conflict with gambling-related laws in Japan.

Kanda said that making election results a subject of trading could affect the fairness of elections, and that careful review is needed.

The JBA proposed clarifying the legal status of DeFi and decentralised exchanges, and recognising digital assets such as cryptocurrencies as subject to property rights. It also presented a plan to use transaction records recorded on blockchains as a legal basis for asserting rights against third parties.

Japan's Financial Services Agency has also begun work on an overhaul. It held the first meeting of a study group on Oct. 20 and began reviewing DeFi, digital wallets and asset tokenisation. It plans to work with relevant ministries to prepare an interim report and a public-private roadmap by early next year to promote on-chain finance.

Even so, related systems will not be implemented immediately. The league's chair, Seiji Kihara (木原誠二), said it will improve systems in stages, starting with custody and settlement of securities and rules on investment trusts, as coordination with the Justice Ministry will take time.