regulation

FSA Allows Automated Market Maker in Sandbox Testing

Norbert Gehrke

16 Jun 2025 — 2 min read

The Financial Services Agency established the "FinTech Proof-of-Concept Hub" on September 21, 2017, with the aim of accelerating challenges toward innovation utilizing FinTech. This initiative was created to dispel the hesitation and concerns that FinTech companies and financial institutions tend to have when attempting unprecedented proof-of-concept experiments.

Now, the FSA has decided to support the following proof-of-concept experiment as the 10th support project under this scheme.

After the completion of the proof-of-concept experiment, the FSA will publish the experimental results and conclusions on its website, including compliance and supervisory response issues revealed through the experiment, as well as practical issues related to legal interpretation that may arise when providing services to general users.

The FSA will continue to announce support decisions under this scheme as they are made.

Experiment Details

This proof-of-concept experiment will verify the provision of services using AMM (Automated Market Maker) functionality to customers who hold addresses (and associated wallets) that demonstrate completion of Know Your Customer (KYC) procedures by financial institutions, using tokens that simulate cryptocurrencies. The experiment will also verify risk reduction measures related to money laundering and terrorist financing.

Note: AMM (Automated Market Maker) generally refers to a mechanism where smart contracts (automated execution programs) automatically calculate trading prices (exchange rates) based on the amount of cryptocurrencies deposited in liquidity pools (pairs of cryptocurrencies to be exchanged).

Expected Duration

From June 2025 to September 2025

Applicant Organizations

SBI VC Trade
Sony Bank
Daiwa Securities Group
Nomura Holdings
bitbank
Mizuho Trust & Banking
Sumitomo Mitsui Trust Bank
Mitsubishi UFJ Trust and Banking Corporation
KPMG Japan

Evaluation Criteria

This project was decided for support through the FinTech Proof-of-Concept Hub after examination against the following checklist items:

Clarity: The experiment content and issues are clearly defined
Social Significance: The realization of the service is expected to improve user convenience and corporate productivity in Japan
Innovation: The service to be realized demonstrates innovative characteristics
User Protection: When general users participate in the proof-of-concept experiment, appropriate user protection measures are implemented, including proper explanations to users
Experiment Feasibility: Necessary resources such as funding and personnel for conducting the proof-of-concept experiment are secured

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