 Okay, so today I will be, I'm from Sonomitsu, by the way, we're a Japanese fintech startup, Japanese in Swiss. I'm based in Berlin, Germany. We're distributed all around the world. And we designed a system called Bakong, which is a blockchain-based national payment infrastructure run by the National Bank of Cambodia. And it was actually the first blockchain-based national central bank operated payment system launched worldwide. It's been running with real money since 2019. And it has been running successfully with no crashes, no security issues. So we're quite pleased about that. And today I'll discuss, well, first I'll introduce Sonomitsu, then I'll discuss distributed ledger technology in the future of central bank money and then go into the system. So why Bakong in Cambodia and why hyper ledger of Iroha as a basis for Bakong? Then I'll talk quickly about incentivizing private sector cooperation within the Cambodian payments ecosystem and then give you a preview of some of the next steps that we hope to take as a company and also some of the National Bank of Cambodia's next steps. So Sonomitsu was founded in 2016. We currently have around 100 people who are growing every day and offices in five countries. We contributed hyper ledger Iroha along with a few other Japanese companies to the hyper ledger project in 2016. That was our first major project and we actively maintain Iroha. In fact, currently we are in the final process of refining and testing Iroha version two, 2.0 I know which our CEO Makoto Takamiya actually gave a talk about in yesterday's session. So maybe some of you caught that talk. If not, then the presentation should be available. I'd encourage you to take a look because it's a real step forward from Iroha V1. And I will talk about a few of the features of V2 at the end of today's talk, but there's a lot to learn. So our best known project is the payment system that I'll talk about today, which we implemented for the National Bank of Cambodia. We've also done work with the CSDs of Slovenia and Russia designing a tokenized CSD ledger. We run a crypto community, a crypto space called Sora. And we've also worked with a couple of different companies, private sector companies like the BCA group in Indonesia designing an identity management solution as well as a couple of Japanese firms like Hitachi and NTT, with whom we've done POCs and a university in Japan for whom we designed a private currency, a closed loop payment system. And then finally, we work with the Web3 Foundation a lot. We're creating the C++ implementation of the Polkadot runtime environment. And we've done a few other projects with Web3. So that's us. And we're turning five this year. And in five years, we've designed quite a few exciting technologies. And we closed 2020 actually by winning a FinTech and RegTech Global Award and Open 2020 with a Japan Financial Innovation Award. So we're quite happy about that. It sets a good tone going into 2021. And with the second version of Iroha coming up, we expect a really good year. So please stay in touch and join us in seeing what the next five years will bring. So Christine Lagarde says that public authorities must balance the benefits and risks of innovation in payments and be prepared to take a leading role in ensuring that payments remain efficient, safe, and inclusive in the digital age. And Fabio Panetta puts it a little more dramatically, saying that the impending revolution in payments requires us to stand ready to reinvent sovereign money. So what would drive these normally quite reserved and prudent central bankers to make such dramatic statements? Well, the payments ecosystem worldwide is changing. As we see payment, this is a McKinsey Global Payments Report from 2020, which indicates that payments companies outperform all other banking sectors in value creation. And the rate of which they do so has risen dramatically since around 2016 when we were founded actually. Fast payment systems are becoming more widespread worldwide. Currently, I think it's something like 50 jurisdictions have fast payment systems, fast retail payment systems in operation, and the number is increasing yearly, including in less developed countries where we would not previously have expected to find such systems in operation. And finally, central bank digital currency projects have really skyrocketed as well over the past four or five years, I believe, in 2017, something like 30 or 40 central banks were running experiments with CBDCs. Now it's up to something like 84% of central banks that responded to the BIS's most recent survey are doing some kind of work with central bank digital currencies. And a couple of jurisdictions have actually launched projects. The Bahamas is probably the best known jurisdiction. The central bank of the Eastern Caribbean currency union is launching a CBDC and the National Bank of Cambodia's Bakon system is not technically classified as a CBDC for legal and regulatory reasons which I will get into later. But on a technical level, it does many of the things that a CBDC will also do. So yeah, we can see that in 2017, around 66% of central banks were engaged in some kind of work with CBDC. Now the level is up past 85%. And also the proportion of central banks that are exploring general purpose as opposed to wholesale CBDCs has risen. So a general purpose CBDC is a retail digital currency that is available to everyday users, not just financial institutions. So why Bakon? The kingdom of Cambodia four years ago would not have come to mind if someone was discussing the jurisdictions with innovative financial infrastructure, forward thinking, financial monetary system planning. But lo and behold, they really kind of stole a move on the usual suspects and began a working group to explore CBDCs in 2016 which was quite early. And we should remember that prior to 2018, there wasn't even really a definition of what a CBDC was. So to begin thinking about this in 2016, they had quite a bit of foresight. They started conceptualizing use cases in 2017 and chose Hyperledger Iroha as a basis for a retail CBDC, which is again a digital currency that's available to everyday users, not just financial institutions. And we very quickly developed a minimum viable product and evaluated it. By 2019, we were ready to integrate the system and proceed with a soft launch with four participating financial institutions and their end customers using real fiat-backed digital Cambodian retail, which is the local currency and US dollars. In Q3 2019, we soft launched nationwide. In 2020 Q2, we published our white paper, which I'll provide a link to at the end of this presentation. And our nationwide launch went well. We received an average of four star app reviews for iOS and Android apps. And this led us to deciding in Q3 to launch nationwide formally. And we were literally three or four days behind the Bahamas sand dollar launch. So we didn't get as much press as we had hoped. But nevertheless, it was a successful launch. And the system has been running since then with 5.6 million indirect users who are users who use Bakong via member banks and 60,000 users who use the system via, sorry, via the Bakong wallet app that sort of means it developed. So there's also been a notable increase in cross-institutional transactions. And this was one of the major motivations for launching the system in the first place to make cross-institutional transactions easier. So the Bakong architecture is the burden is shared between the central bank and commercial financial institutions. The central bank runs the core ledger. It's responsible for creating money and it's responsible for creating domains and accounts whereas commercial financial institutions maintain Bakong settlement accounts that are backed by their central bank reserve accounts. They also run payment gateways which are mobile API servers. And they're responsible for onboarding end users conducting KYC, controlling end user personal identifiable information and integrating with the core banking system via ISO 2022. And I don't really have time unfortunately to go into the technical details of the architecture but a lot of this is available in our white papers and other literature which I would be happy to send you a link to. So why Project Bakong in the Kingdom of Cambodia? Well, the first motivation was that in 2017 Cambodia suffered from very low financial inclusion. Only 22% of adults had accounts at all. I believe only 15 or 16% of adults had financial institution accounts and only 16% had made digital payments. And this rate was even higher sorry even lower in rural areas among women, among the poor, among the young and the elderly and all of the other groups that normally suffer from poor financial inclusion. There's also a very large informal sector including many underbanked or unbanked MSMEs. And that's a problem both for MSMEs and for the Cambodian government. Obviously it's difficult to collect taxes but it's also difficult for these MSMEs to keep on top of trends in commerce. So for instance when tourists come to Phnom Penh and want to use a digital payment app with local merchants they can't so they turn to multinationals instead which cuts into the local business models. So offering these MSMEs and also everyday citizens some form of accessible digital payment the national bank decided would provide a public good. The payment infrastructure, the payment ecosystem in Cambodia was also quite fragmented. There was a good settlement infrastructure for banks. There's a fast retail payment system called FAST and also a CSD. But these were not accessible to payment service providers or microfinance providers. Because of regulatory issues a payment service provider that was not registered as a bank did not have access to the settlement infrastructure that banks had access to which led to a proliferation of isolated closed loop systems whose users could not interact with each other could not transact with each other unless the companies reached some kind of bilateral arrangement which was extraordinarily efficient for the companies themselves and also quite inconvenient for retail consumers, retail users. And there was also a lack of incentive for private sector innovation because it's a poor country and because banks did not see immediate potential for profit offering a wider range of financial instruments and services. There was not a lot of growth in the kind of services that financial institutions were offering or developing including online banking offers. The online banking offers that were on hand in 2017 in Cambodia were pretty rudimentary. Other contextual factors were dollarization and a high mobile broadband penetration but a low mobile money penetration in 2017. So the NBC saw this, they saw that a lot of Cambodians relatively had access to mobile broadband but that mobile money had not yet made a move into Cambodia to the same extent that it had in, for example, East Africa. And they saw this as a real opportunity to launch a system that could change Cambodian's lives for the better. So why Iroha? Number one, Iroha offers final irrevocable and secure transactions. It's a focused and circumscribed digital distributed ledger technology with Byzantine fault tolerant consensus. It doesn't try to be a database. It doesn't try to be enterprise management solution. It's a blockchain. Its logic is be a blockchain and that allows it to minimize attack factors to reduce the potential attack space which is important when you're talking about creating a new system critical infrastructure. Number two, it's modular. It's open source via the Hyperledger project. There are SDKs available in multiple languages. And the NBC, the National Bank of Cambodia decided that this would be a benefit for them because they wouldn't be locked in to working with a particular company necessarily. Although they have been working with us regularly and we have a good relationship. They didn't want to suffer from lock in on critical financial infrastructure. It's very user friendly. It has a simple command line interface which looks like this. And this is the basic version. Gives you a menu of transaction types that you can choose from. I encourage you to check out our GitHub and go through the quick guide and try setting up a Hyperledger at Ova node on your personal computer. It's very easy to do. It's also mobile first. It has a functional and customizable end user app that we developed for the National Bank of Cambodia. And here also you can test out the end user app. I was gonna do that, but I don't think I have time. So I'll just show you a picture instead, a mockup. It's very easy to use. I'm sure that you've used something similar. You can send money to a registered user via a QR code scan, via inputting their phone number or account number. You can also display a QR code that others can scan and send to. You can deposit money to existing bank accounts, either your own bank account or another person's bank account. And the QR functionality is particularly useful for micro, small and medium enterprises, medium-sized enterprises, because it doesn't require any special infrastructure. You don't need a card reader. You don't even need a landline. You can instantly accept and bank payments from any other back home user without investing, without sinking capital into these payment service provider-specific infrastructures that you may or may not actually end up using. So it's a very easy way to take a step into the world of digital payments for MSMEs that don't have a lot of capital. It's also fast. Iroha is quite computationally efficient. It's scalable. And it has a print transaction time of around 2.5 seconds and a throughput of around 2,000 transactions per second. And we're always working to improve those numbers. Although for Cambodia, this is sufficient to cover the transactional needs of the population, which is around 17 million people. We don't have 17 million users yet. We have around 5 million indirect users via our bank partners. But in theory, everybody in the country could use the system and it wouldn't endanger the functionality of the system. And finally, it's context-appropriate. It has a roles-based permission system, which is uniquely suited to a multi-stakeholder environment, which allows clear roles for the central bank and for commercial FIs. It also allows a segregation of data for a balance of compliance versus privacy. And I wanted to show you quickly the desktop interface. This is the interface that a financial institution would see. And as you see over here, there's a menu of different kinds of operations. Right now I'm logged in as an admin or a manager. I could also log in as a teller and then I would have a reduced menu of options. And this is easy to implement on the front end because on the back end, Iroha uses a roles-based permission system. You create a domain, within that domain you create a number of different roles and then you assign permissions to each role. So it's very well suited on a backend level on an architectural data structure level to this kind of use case. And I was mentioning KYC. And for instance, here you see the KYC status. Backong has a tiered KYC system. So you can open an account with a Cambodian cell phone number without going through any KYC, but it has a limit, a limited transaction of I believe 250 US dollars per day. I could be wrong, I'd have to go back and check that, but that's also available in our white papers, which was, which the limit was set in order to comply with local and international AMLCFT. In order to raise that limit, you have to undergo a KYC procedure. The first level would be a virtual KYC procedure where you take a selfie video and then you scan your government ID into your smartphone. It compares the two and then verifies you with your host bank. The second level you have to go into a bank physically and conduct KYC with a teller. And the benefit of this is that it allows banks to continue to use their normal KYC business processes that they use for core banking. And another benefit is that it allows the National Bank of Cambodia to maintain access to all transaction records without maintaining access to individual users personally identifiable information. So for instance, on a central bank level, you can check transactions by inputting a hash like this. And it'll tell you the transaction info. So here we have the transaction hash, the creator ID is the sender, admin at test, the creation time, the command and the assets transferred from the sender account, admin at test, the recipient account, which is in this case, test at test, the asset ID and the description and the amount. So this is what the central bank would see. And these IDs are pseudonymized. They don't have any intrinsic connection to the user's actual identity. What the commercial bank would see on the other hand is something like this. They would see the account ID, the pseudonymous account ID, which in this case is right here that would correspond to this. But they would also see that user's KYC identity documents that they provided for KYC. So the central bank has access to all transaction records, but no PII. The commercial bank has access to only the transaction records of their own user base, but they also have access to the PII. So there's a segregation of transaction data and personally identifiable information that allows for a balance between regulatory compliance on the one hand and privacy on the other. And using established legal channels, the central bank could quite easily subpoena the PII of any accounts that were found to be engaging in the legal activities. So it's a really elegant and efficient way of maintaining that balance. And wow, time flies. So we've gone through some of the benefits of EROHA. The last thing I wanna talk about then is where does Bakong fit exactly in the CBDC space? And in 2018 when Bakong was first developed, CBDC was still a, there was no agreed upon definition other than it was a new form of sovereign money, a new form of M zero. Since then, there's been a lot of research done and this comes from the Bank of International Settlements Quarterly Review March 2020. It distinguishes between indirect, direct and hybrid CBDCs based on the two criteria of the legal claim. Who is the currency a claim on? Is it a claim on the central bank or is it a claim on an intermediary? And are the payments netted and deferred or are they real time gross payments? And our and boom who created this typology define an indirect CBDC as one in which the legal claim is mediated by intermediaries and payments are deferred. They define a direct CBDC as one in which the legal claim is direct on the central bank and the payments are conducted in real time. And Bakong kind of crosses the boundaries of these because the legal claim is indirect. The legal claim is mediated by users commercial financial institutions. As I mentioned before, each financial institution maintains a Bakong settlement account which is linked to their central bank reserve account. So the claim is mediated by the commercial bank but the payments are written in real time on the distributed ledger maintained by the central bank. And the benefit of this is that you achieve the advantage of final and irrevocable transactions with legal finality without the drawback of disintermediation. Because the risk of disintermediation here we have some barriers for private sector participation. The risk of disintermediation has been widely discussed. If the central bank begins to take retail deposits then that will mean that the deposits on the commercial bank's balance sheets drop. So that would give commercial banks less money to work with which would then in turn, in principle at least reduce their profitability cut into their business model. Within Bakong, there are these clearly defined roles for the central bank as the operator of the ledger and commercial banks as the maintainers of accounts. And in this way deposits remain on the commercial bank's balance sheet while still maintaining the security of having a central bank backing in the end. The accounting model also minimizes the need for regulatory reform because KYC remains with the commercial banks. It has a very low cost to adopt for private sector players. The client module is plug and play. The business processes APIs and GUI are carried over from or integrated with the core banking system. And it has minimal hardware or personnel requirements and a clear explanation of how costs can be recouped. And actually prior to implementing we calculated the savings, potential savings for commercial banks and our modeling indicated a potential savings of around $240,000 US dollars per bank per year which is not a lot of money for a bank but nevertheless it helped to assuage the fears of banks that participating in the Bakong system would become a loss leader. So as of 2021, we are happy to say that we have the majority of Cambodian banks on board including some of the major mobile money operators like Wing. Wing is the big one. I think that they cover, I forget exactly 90% of mobile money transactions in Cambodia or something. They have a huge network of over-the-counter agents and Bakong allows users of commercial banks to take advantage of the PSP's huge networks of over-the-counter agents. So it has made life a lot more convenient for Cambodians and for Cambodian small businesses. And it has also incentivized PSPs to develop more bank-like services, a wider range of services. And it has incentivized banks to develop a wider range of PSP-like services. So it's enriching competition within the Cambodian payments ecosystem or co-optition to use a buzzword. The Director General of the Cambodian National Bank states that in terms of us destroying the payment service providers, I think by creating interoperability, it shouldn't destroy them, it should actually be strengthening them. They should take it as an advantage. Interoperability shouldn't kill competition. Competition should use that and make it more meaningful. So yeah, five minutes reminder. Okay, so if anybody has any questions, please put them in the chat really quickly and I'll try to get to them. And if not, then feel free to email me at edwardsatsonamitsu.co.jp and I would be happy to field any questions by email as well. The presentation will be accessible online, by the way, right after this talk. Okay, great. Well, unfortunately we're out of time. I didn't get through everything I wanted to, time flies. But hopefully it was informative. Hopefully it gave you a good sense of what the system is and what it can do. And hopefully it set you up to be able to ask some questions personally. As I said, feel free to email me anytime and talk to you soon, hopefully. Bye-bye.