 Hello everybody. Let's go ahead and get started. My name is Boris Van Duke, I'm the founder and editor-in-chief of Crypto Law Review and I'll be moderating this panel, which is titled Blockchain Regulation Beyond Finance and Compliance. And we're extremely honored to have a group of panelists that will be speaking to us about the intersection of law and blockchain, specifically with a view towards increasing stakeholder participation. And I'll take a moment to introduce everybody. We have Jean-Paï Miwa, who's the director of Fintech and Innovation at the Japan Financial Services Agency. Yuta Takarachi, who's the deputy director for research on blockchain at the Japan Financial Services Agency. Brandy Ryan, a court researcher at the Ethereum Foundation. I am Miyaguchi, the executive director of the Ethereum Foundation. I'm Yuta Takarachi. I'm Yuta Takarachi. I'm the founder of Luxo and the developer of the ERC-20 standard. I'm the developer of the ERC-20 standard when they cut in the ten, among many other developments actually. And what we would like to do is start off with a presentation by Miyaguchi, the latest efforts at the G20 level. And I'll hand out the report again. Thanks so much. Good afternoon, everybody. It is very my pleasure to give you the opportunity to speak at the DEVCOM, which is the most dominant Eastern-based conference here. I'm also honored to be present here as a status of the new presenting as a regularity committee, of whom somebody simply did some enemy. But either to be a first appearance from the regularity committee or the technical committee. Before starting by a physical part of my presentation, so let me briefly touch on what we do as a Japanese FSA. As illustrated here, the regularity coverage in each financial authority and various major jurisdictions. JFXA acts as the Integrated Financial Authority, embracing the four financial sector regulations and websites, including the banks, securities and insurance, as well as the crypto asset exchanges. Compared to the other regularities, on a global basis, JFXA has a broader capacity and includes the policy planning function. So we very smoothly take the policy issues and also address the first change in the crypto asset market by multi-faceted functions intended to us. Let's move on to the physical parts. First of all, the choice of the venue for this year's DEVCOM has resulted in truly timely, because Osaka gained good momentum of G20 in the area of crypto asset and decentralized financial technology. Just three months ago, G20 Osaka summit was held here under Japanese presidency here in Osaka, and where G20 leaders discussed the technological innovation of the financial system, anticipating the decentralized technology will be deployed with the environment where the technology can be fully attached. The G20 leaders have reached a particular consensus on accepting the necessity of the wider state for the dialogue and vis-à-vis the fast-moving decentralized financial technology. The first slide illustrates the accept of Osaka with the technology that highlights the part. So in another aspect, the choice of venue in Osaka maybe would meet the fundamental nature of the Seattle community because Osaka had undergone a fully meaningful development by building the specific financial architecture with great creativity, especially combining the commerce with the finance from over 300 years ago. It can be said that Osaka is the origin of the financial innovation and the foundation of the current financial architecture. Long before the era of the current back-centric financial system, maybe around 100 years ago, the long distant settlement system, currently the back-marriage system. So through the exchange in Europe was operated in Osaka for the transaction with distant customers such as those in Tokyo. The innovative financial architecture was also extended to the area and the commodity futures exchanges in Nice, which was the first enlarged in Osaka dating back to the 70th century as the origin of the derivative transaction in the world. Osaka's well-developed financial architecture has been underpinned by a dominant merchant group who played around Osaka. Such market players manipulated and modernized the accounting system through double-entry bookkeeping over 300 years ago. That eventually leads to the basis of the current venture technology. Next slide. Over 300 years have passed since then. cumulative wisdom of the financial architecture from the past may be fully transformed since open distributed venture technology could fully replace it and may allow for the provision of backing services with a tank. In addition, the long-standing tap-streaming issues in the digital cash is a technical result in combination with the conceptual algorithm and economy presented through the mining and decentralized network like provided by the internet. And also an immutable niche feature provides the revolutionary changes of learning digital ventures in the last month. And in addition to that, blockchain, which originates in Bitcoin, is going to extend further applicability through programmable and salient-based applications. Contract-based counter-parking will be smart as a before and such a salient-based solution will give rise to the emotional changes in finance and commerce, of which the past merchants may have dream of. As stated in the G20 OSA categorization, crypt assets do not pose material risk, material is threat to the global financial stability at current junctions. The market cap of the crypt assets is quite small in the global financial system as compared to the incumbent financial services. In addition, many people observed that widely accepted deployment of the blockchain may not come to India at any time because we recognize the underlying technological immaturities as to the scalability of the service. But at the same time, we recognize that the wide acceptance of the blockchain would bring the great potential to depress the conventional rule and change the game and even transform the way of the trust. So, as you know, the decentralization is the principal factor of the blockchain. Crypt assets underpinned by the blockchain are basically designed to attain full P2P transaction where any economic intermediary such as the crypt assets exchanges are not anticipated in the transaction. In fact, Satoshi's paper, 2008, noted the motivation in the first paragraph. This perfect known intermediary system designed by cyber developers may give rise to the change in the role of regulators in general. The regulator's regulatory power is sustained by the specific economic agents which standard the physical regulatory targets such as the banks, insurers, or a crypt asset exchange whatsoever. In reality, in the current crypt asset businesses, Japan, Japan's financial agencies, impose the requirement to the crypt assets exchanges to counter the anti-money laundering by introducing the customer identification rule. The rule is motivated by the standard made by the part of financial action task which is the government organization which sets the standard of the anti-money laundering. So in this slide, let us think of why regulators layout such regulations. We should be aware of our motivation first. Financial regulators generally have three coherent regulatory goals such as to maintain the stability of finance to protect the investors and the consumers and also to prevent the financial discontent including financial crimes and anti-money laundering. Contrary to the Satoshi's motivation, the current crypt asset business is sustained by the economic agent such as crypt asset exchanges or current regulatory structure which impose the regulation to the asset exchanges do not pose a full guarantee to daily transactions. Since we have faced a new type of risks that emanate from the technology layer. In crypt-based transactions, inherent nature of cryptography provides technological risks such as cyber compromise that may be susceptible to the current mining structure. Or the new threat of attacks from the cyberspace. Under this anticipated situation, so who care such risks? The negation could not cause any prescription to the technology issues or could not provide the medicine to such risks. In the future, decentralized exchanges and layers network that operate automatically will eliminate current agent business such as exchanges. Assuming this sort, we may face the reality of losing. Explicit our regulatory target will face a new challenges. As to further, we are able to sustain our regulatory to ensure the robust security and to attain the privacy and the security issues simultaneously such new risks every way of us cause the difficulty in achieving our regulatory goals. So in addition to the nature of decentralized as mentioned before, the autonomous nature in blockchain may prevent us from stopping or cutting the transaction once the system starts its operation. An artificial system controlled by the program would never stop regardless of the third party intervention as if we are fighting with the post. If we take the policy that prohibits the whole Crypto asset transactions, it may help activities go over boundary or go underground in the darker market. So in addition, anonymity nature also causes a new incentive for hiding the privacy which could reduce the traceability and the difficulty in the possibility. So earlier in my explanation we touched upon the scalability issues. As you know well, as you know well, Bitcoin promotes scalability to Nelma that implies underlying trade off of blockchain scalability referring to the security and decentralization it should be achieved simultaneously. While this twisting try and represent the developers to Nelma, but other people may face new twisted Nelma, scalability instances. The more scalable transaction that blockchain can be attained, the greater concerns over privacy, technology model, users and regulators may have. Moreover, many users may seek for more convenient transaction, transaction or convenient services to be connected to the other crypto asset. Maybe in the future interoperability will be a new variable item which causes the complexity. So assuming this so, how should we, how should blockchain stakeholder may act as the governance of decentralized international system? At the moment, key actors such as developers, academia, security experts and regulators of blockchain ecosystem are still independently worked with enough communication. So even under such fragmented developments it seems that at minimum every stakeholder do not pose, do not hope to make further friction and necessary dispute with asset transaction. So proper coordination will be of necessity. Communication itself will contribute to the reducing gap between various stakeholders while we recognize it is hard to define the common languages between us and to create a place for the building for the consensus among us. Especially from the regulatory perspective facing the past innovation, first place innovation we may firstly react not to lag behind the innovation. But I made no consensus of the value in technology and with that communication with other stakeholders regulators would face a dilemma between the criticism of innovation those who emphasize innovation and criticism of procrastination by those who stress the need of the cultural protection. Thus we need to properly recognize the underlying value of the technology. So the balance between the innovation and the expectation among various stakeholders. So thinking that what proper governance is truly important. So maybe in the future decentralization system. So this slide the JFSA have been taking a step toward the healthy governance in communication with the stakeholders. So we hold the Proxie Mountain fully hosted by us represents a model of much stakeholder meeting. This round table extending capacity with the participation of the major international organizations such as FSP, IMF and OECD. And as well as the academic community from the MIT Georgetown University Cambridge University and Cambridge University from Japan side. So as well as these industrial experts security and crypto asset developers have also invited to join us. So before the G20 summit in Osaka G20 Finance Minister and Central Bankers meeting have in Osaka also having of course using this opportunity we hosted the high level seminar on innovation and the future design of the governance system and the launch state for the financial system. In this session too we invite Mr. Adam Back CEO of the Proxie who is the kind of king of cyberpunk. And class note, CEO of Danche Central Bank as a representative of the financial community. And we also invite Shinjiro Matsuo from the academic side who has a very excellent security and cyber issues. And the moderator was Jun Rai who is called as Internet Bot very famous in Japan. So he is a moderator. So in G20 so we hold the March State Court Discussion with other businesses. So last week we once again created the meeting for stakeholders discussions of necessity to discuss the future design of governance system. In this context we really appreciate the Eastern Foundation to give us such a great opportunity to have a State Court Discussion. And we would like to evolve the communication and the final discussion in the next stage toward State Court Forum next March in Tokyo. Thank you very much. And maybe a good jumping off point would be one of your slides where you introduced an extended Vitalik's scalability trial where we give us the scalability, privacy and compliance and we can attach several stakeholder groups to these three categories just as an example. So privacy, for instance, could be focused on users scalability perhaps and developers and compliance perhaps on the needs of regulators. So first question would be what do you see as the biggest challenges to multi stakeholder governance today and maybe a broad question for the panel. Anybody who would like to respond? Firstly, I think there's a lot of difficulty in creating the common leverage between State Court Discussion. Through the discussion of the blockchain learning table mentioned before we kind of spear out the many important aspects. So through the discussion of course in the technical side there's a current dilemma to achieve the scalability as well as the decentralization and security issues. But through the discussion many people currently are very focused on the issue of privacy or privacy enhancing technology such issues. So through the round table discussion so we address or we spear out the underlying kind of motivation by developer and by regulatory side. So through the discussion we create the right side kind of a dilemma or twisting trial issues some scalability, privacy and compliance issues. So I think the first step the important thing is what is important, it's to discuss you know with a balanced state folder. So of course we do not fully understand the developer's motivation but through the discussion we recognize that I think in case of privacy issues of course we you know enhanced privacy so we are very concerned about the traceability issues but on the other hand in developer side they are very much focused on the issue of the fungibility of the predictor thing because they are current fear of privacy very privacy enhancing or anonymized based paper privacy. So we recognize the current development motivation to use privacy enhancing. So I think firstly we take a step for further discussion So I would also like to add to this it seems right now from the financial side that there's a lot of focus on the financial regulation because it's kind of like we're coming back to ok Bitcoin is a thing now we have these assets and we have a 20 or $200 billion market but the problem which I'm seeing is that there's a lot of things happening that are not necessarily financial that could be seen financial but this can also seen as commodities and the question is where do you make the boundary between what should be heavily regulated and what not because the problem with that comes that many of these things are very experimental that are happening here and by putting up a lot of burden of fulfilling getting licenses and a lot of the rules which currently exist that want to be now applied to these crypto assets they were made for a completely different system they were made for a paper based trustee based system with intermediaries a lot of them and a lot of those regulations like it's like I mean it's like putting horses in front of a car you know the car you drive you don't put the horses there so when we are sitting in we are ending up in situations where it becomes very complicated then for startups to just do things you know like the last few years we had a lot of innovation because people would just do it because there was not too many regulations and now it seems like among this package of a lot of rules comes on top of even the smallest developer who just writes a smart conduct and builds a wallet for example so that's kind of a hard balance so I think the most difficult thing is to have the understanding of what is good for society and so currently the regulators have maybe 3 goals as we also said so the financial stability investor customer protection and pretty much in recent activities so these are not like we regulate but the ultimate goal is to achieve these 3 goals so if something different other than like regulation achieve these 3 goals we don't need to have regulations so of course as you mentioned customer protection privacy is very important for the protect customers but at the same time we need to catch criminals to get them into jail so that is also important so it's not like the privacy and choice of media or the financial crisis is not a good or bad thing so both of them is important so it's kind of completing this thing so we can balance balance between customer protection issues and also the financial crisis issue is very difficult to achieve only by regulation because as we also mentioned so blockchain based financial system has developed characteristics that makes us very difficult for us to enforce regulation we can write regulation it's relatively easy just write just prohibit but still it's very difficult to enforce this regulation especially in the bitcoin system or in Israel and in the blockchain because it's autonomous and decentralized and also sometimes anonymous so especially for regulators so if we compete with technology we will lose that's the problem for us right now so but still we need to achieve these 3 goals as I mentioned for the society the people in the society need to stabilize financial stability or protect consumers and investors and also catch criminals all of this is not for us but for us but also for society as a whole so the question is how we can achieve these goals even within the decentralized system so that is the question we need to answer but it's kind of open question right now regulators are all will not be able to achieve this even though highest standards or heaviest regulation we can not achieve this so that is the reality but still society need to then regulators need to ask otherwise engineers or businesses even the larger society to and then cooperate together to come up with better solution just not just by aviation but also maybe by technology or social and market system or businesses so we need more technology we need more tools to deal with these issues that is the difficulty so I've been interacting with regulators in Japan for a few years now but I think the biggest challenge that I always feel is we outside understand the regulators purposes like we need to consumers we need to avoid money laundering all that but we are the community is working on this technology for the better society and I always wonder how much regulators who are here like you're going to come to your own understanding side but I always wonder how much flexible the regular can be if they actually have the opportunity to learn like good education about everything that's happening in the space meaning I guess such as with the kids in the manager they don't have right of education and this technology can make that but how much the regulation can be flexible is always when we are communicating it's really hard if that part is being considered and I think it's probably the biggest challenge that we're in with all other challenges is the lack of education it's so hard for even people in the community with everything with the newest updates and these people here that are like you guys know the latest updates on the skating and also like the year C20 but that's not something the regulators can seem to do on a regular basis but they have to meaning the regulations also before making any regulations they have to lose everything like otherwise once it's in the regulation that they can't fix it to speak to the some of the good that this technology can do for society is that there's this whole other section that due to certain nuances in regulation or lack of regulation we now have huge mass companies that control all sorts of things about society in our lives and that this technology actually could be used to disintermediate some of that some of these issues with other types of technology so by squashing it which I know is not what you intend to do at least from your perspective we kind of lose the tools that we're trying to enable this so the biggest challenge for us maybe for us regulators maybe the change of mindset so at least at this moment the regulator is kind of keen in the financial society because if the regulator say something the board of managers or all the insurance companies follow us it's much easy, it's very easy so just like regulation and they just order something in the financial industry but right now it's changing so if we write regulation maybe we cannot enforce so it's similar to the internet so the internet case until maybe so the telecommunication regulators can do anything about telecommunication or mass communication or the contents but at a certain point in time so they lose the power to enforce the regulation like other than the peer-to-peer sharing some things makes it very different for them to prevent the criminal activities in the internet or cyber space so the financial regulator face similar situation right now like the peer-to-peer sharing so it's much easier for the people to do crimes in the peer-to-peer basis and we regulators have no power to create regulation on this area so that's the problem so we need the first thing is we need to understand what is happening and then the second thing is we need to change mindset so we are not like special power in this like space so D2 is still as Aya san said so we need to be learn educate ourselves we need to get accustomed to this new reality to find out why we need to talk with others they call us that is a fundamental thing absolutely I think by the way can everybody hear us in the back so I think the education and the understanding of the technology is super key because otherwise you know you regulate something on an understanding of what financial assets were 100 years ago like ISS once this is in law it's hard to change or it's hard to roll back because you're not just in this position so on the one hand I think actually the whole regulatory landscape in general government in the last degree has to change a lot because it has to become tax saving I mean tax saving first this society is not going back to paper but everything is still behaving like you know the tax is going away and we'll go all back to our shelves with paper in it it's not going to happen so this means developers and tech people have to be part of those regulatory bodies first because they understand then how does it work and how could useful solutions be applied I mean to the triangle we have there on the the quartet what it is now so the the situation are here exactly this one the goal for the regulators is to create financial stability that's a bit more difficult when we talk about protocol based coins because they have a very clear path of how they are issued and if people train them up and down you have movements like in any market so it's harder to regulate than that one in terms of consumer protection I think it is in the interest of the whole space to build things that protect people so far there is nobody strongly supporting scam projects on guitar this is mostly like a very small group of people so there is a lot of things we can actually build security on chain so because we have the ability to program anything we have the ability to build logic in that makes it safe by design which then actually removes the need for regulation in the first place for example if people think about the ICO wave and then people invest in scam projects and end up with nothing you know if we build a system and one for example I have proposed if you are basically putting this money in a smart corner and give it over time to the project you would immediately create equity for the investor because now he has the ability to reverse his decision at any point in time and his risk increases over time which is a very clear thing to see so things like these formal moments where people rush in and think they don't get in anymore, don't even scroll down the website and then send money only to realize they actually bought something different than they thought that becomes impossible if we make it smart and fair by design and do that we don't need to try to apply all of these security laws for example we have to the blockchain world because it really makes things impossible and it also takes away the whole user experience one thing why ICOs were so awesome were because it was the first decentralized cloud sale ever in history so you could actually just participate very simply and just because you wanted to today actually a lot of the security laws are seen more as a restriction of the small investor to participate in financial markets not necessarily the whole like security token thing I mean even people that are saving the space can't be investors anymore now because they have to have to buy the town so this means the guy with the million can make more money and the guy with like his thousand bucks cannot invest because of regulation so we have to really rethink how we apply it and when it comes to traceability and preventing misconduct one solution is by using on-chain smart counter based accounts we can attach KYC information not the detailed information but let's say a signature that this account is known to some people like for example regulators and then if that person does anything he can do it as easy as he did before by simply sending transactions but in case there's any wrongdoing you could check who that person is and this for example would be a way of circumventing that because you want to say something else no and I very much agree that through mechanism design we can do all sorts of things that add in consumer protections and add in certain guarantees that maybe we traditionally had to get through regulations but all of this hinges upon a programmable environment and just as easily as you can program these things and maybe people might choose to opt in to certain types of mechanisms you can program all sorts of other things right so you can program like if you have a decentralized blockchain and if you can program on top of it then you can program these zero-knowledge things such that the regulators can't see and you can't track and you can't trace and if people don't opt into the mechanisms that the government would agree with then it doesn't ultimately help regulation and the that would be too right the problem also is that if you now would regulate this by preventing certain things for example you can say you cannot use zero-knowledge coins but you can use this KYC account you created here the problem is you are not preventing criminal activity at all you just forbidding encryption is the most difficult you ever I mean terrorists wouldn't say oh my god it's illegal to use let's not encrypt right now I mean this is just very naive approaches which on the end prevent the good use cases from not happening because of a stupid law and so it does seem like the binary of this is allowed and this is not allowed was decentralized context fails to work and I don't know the new property I don't know I guess when zero-knowledge happens and they would need to know then what's possible within the range it's really this new new but it's still being written it would help that's a bad conversation it's still not happening actively when it's done when it becomes product away there is no way to do anything other than just no no anonymous talk and exchange which is a case because they can obviously be used from terrorist activity they can also be used so that facebook can't see everything that I do so when we talk about financial regulations it's relatively easy to identify one let's say policy goal and that is the stability of the financial system but in the conversation that we're having we've already identified several other legitimate regulatory goals provision of criminal activity you mentioned securities law so I guess the question would be we hear often that decentralized technologies make it difficult for regulators but to what extent does blockchain help regulators achieve their broader policy objectives so as an example helping to make economies less prone to monopolies if it is completely decentralized probably it's difficult for anyone to control everything so in that sense probably the monopoly or the competition will be more advanced but at the same time so if we think about some people working on like audit key or something if someone agreed to open their transaction history to the authorities they can do that by using audit key something like that this will help us to understand what happened in the blockchain system so that may be better than just nothing with the decentralized tool but still so we need to identify the suspicious activities within the system so if someone have the ability to open their transaction history to us maybe we still need to identify who we need to ask to open the transaction history so some people says the with audit key will help us to prevent financial crimes but still still it's not enough for us maybe so if we like feedback to these people creating this system from our perspective probably they can come up with like other solutions or better solutions so this composition will in cooperation between the regulators and engineers to come up with better solutions so in that case probably the technology will help us with social programs not just in financial system but also in the other areas as well maybe as a person the blockchain technology achieve the more decentralized fair trade but on the other hand we have to look at the current situation so there are big 10 companies here so they are very hyper centralized so as I said looking at the economic intermediary services so we are looking at the blockchain technologies you know in the first motivation by Satoshi's paper so they seek for the fully P2P based transaction very fair trade but in reality we have intermediary services such as exchange so if in the future we eliminate such services we accomplish the perfect decentralization perfect fair trade system but currently we are in the process of the decentralization but in current situation so far we are we have the big 10 companies we are hyper centralized so we are concerned about the competitive competition so of course in current situation we are looking at the hyper centralized than the process of decentralization so I think both of them is a very we are we are very much concerned about the kind of situation but currently we have very fragmented situation but one slide is the hyper centralized the other side is the process of the decentralization so that's why so far we have to look at the various situation in the current development but at the same time I mean there is some exchanges these are entities which can be audited right and actually most exchanges are really like completely combined I mean there is barely an exchange that is not an if it has almost no volume I mean the BTCE and so on that doesn't exist anymore but I think because it's such a different nature of assets because it can be so much more we have to think a little bit beyond that because we end up regulating them everything including like tokenized houses or communities something made up by people like Dogecoin you start to regulate them everything under a financial for example when we talk about securities there is a promise of potential future return of the company that's not necessarily the same you don't have the same with any of the other assets nor do you have voting rights maybe in some kind of stakeholder shape maybe it's just purely decentralized community that way the coin has meaning and nothing else and when you regulate it the same way it just creates a lot of friction which will push the people and that's the beauty of technology it will push the people out for example if we ask people to say hey if you make a private coin make an audit or key in there there's a few reasons why this wouldn't have happened the first reason is you create a vulnerability in your system by design which is exactly the worst thing you could do so this regulator body could also be hacked data could be leaked so you end up with a Facebook like problem and on the other hand people will just use it then they will tend rather to use the other one and because people can just make up these coins installing software now and software is really easy so if you want to get the terrorist or the evil doers or the wrong doers or you want to catch them then they might not be in the system they might be in the other system where you cannot okay so the thing is like you said initially it's catching a ghost it will be impossible so it's rather smarter to think okay how can we build systems that are by design fair and better done and the intent of most people is to actually adopt systems that make sense for everybody I mean if somebody comes along and says I have this permit scheme and I will win on the end there's not many people rallying around that except if there's like a little benefit for each one along the way so we have already this natural tendency of trying to make things fair and then useful for everybody we just now have to figure out the behavior and economics how to do that and crypto economics how they call it or whatever and that's actually a new way of doing that how you direct behavior in a way and not just like from top down speaking of building systems maybe a direct question to Danny so over the last couple of days we've been hearing about the transition to proof of stake and so we've also been hearing about the importance of non-financial use cases what are some of the unique features of the proof of stake systems for instance that you see that fall outside of current regulatory frameworks great question so some people look at say a proof of stake system and maybe begin to look at it like a security or maybe like that it's gambling or things like that but it's actually this whole new thing where it's it's kind of like access to participate in the joint creation and in construction of a protocol that then can be rewarded or at the same time risk and so this doesn't look like anything really that we have in the books and it's kind of a whole new and emerging thing and then of course all the things that you can build on the highly scale system that we are creating like none of these things is sort of the same for you or so it is I know that some people are worried that these things might be attempted to be regulated in more traditional ways whereas they don't quite fit into the buckets just continuing that maybe opening it up to the regulators on the panel one way that people talk about proof of stake E2 is that the deposit smart contract as an example is a sort of an investment and then validator rewards are sort of interest earned and so that automatically brings to mind the analogy to a bank and so I'm wondering from a regulatory perspective how you're looking at emerging proof of stake systems not just the theory and thinking about existing classification it's a very difficult question because in the superficial it seems like banking activities or similar to other incumbent financial activities but in reality if we look into details probably it's lots of differences like the economics within the system or incentives or maybe the legal nature so every implementation has slightly different features and then we need to look into all the different features to understand the actual economic meaning the legal meaning from the economic perspectives or legal perspectives to understand how we should deal with and then maybe as a consequence maybe it falls within the incumbent existing regulatory framework but maybe it's not so still this kind of discussion is I think it's not happening right now so as far as I know no regulators actually look into this proof of stake system to think about how we should deal with because we within our limited capacity or limited knowledge or technical knowledge it's very difficult to see who are looking where so it's still our stage in the development so not like Israel is still not in the proof of stake so if Israel moves into proof of stake maybe we need to think about but at this moment it's not urgently, immediately so as far as I know no regulators have clear understanding, clear idea how we should deal with this issue so that is a reality right now so maybe picking back on that what do you see is the role of the Korean foundation and educating not just regulators but other global stakeholders on these new challenges and opportunities so we just hold ourselves as a miscellaneous allocator the other day but that means even just I ask these people to join this discussion and whether it's from the within the Korean foundation or in the community we do have experts in all of these and maybe I think when we talk about the proof of stake we mentioned what people would see as a miscellaneous allocator the moment someone started seeing that way I hinted at this is that it's going to be put into one existing category in that future I think we should keep having these conversations and then they can figure out maybe it's not the time to think about it yet and that's possible if someone like Danny can sit next to each other and then thinking this year oh this is what's happening and then there's nothing we need to worry about if there's this trash I'm not saying I'm going to give all the pressure of Danny here but if that's possible more regularly and then I think like I've said it would be great if regulators actually have more texts having people which I'm very impressed and also grateful that you two are joining here and that you already have learned about the technology compared to a few years ago in the case when it was having a conversation I think it's improved in that way but for us to I think the EF's law is we're not never going to control the regulatory direction but we do have access to all the companies. No, it's not it's not like the project or the new technology and then we can point to that or we can sometimes like if EF has expert within ourselves we're happy to support that but also we can reach other members and I think it's always if education changes a lot and without that we tend to have a lot of this kind of just being able to understand what can be really very important. What's interesting is you're not looking for a say yet and maybe when it comes you'll look at it then that sentiment can actually like I know you want to you want to encourage innovation and encourage innovation in these areas that sentiment can actually be discouraging because then when you see signals we're going to deal with that later but we're going to deal with it that puts all of a sudden a lot of unknown and risk whereas especially if you at least begin to understand the technology sooner and at least put out maybe not formal policies but memos and things that let people be aware of the conversations that you've had and the way you're beginning to see what we do look at the mistakes that it's more like you're providing a service to the protocol and to the theory community and doing so you have certain risks associated and can receive certain rewards it looks more like providing like being sort of like a business and providing private writing services rather than like a straight investment in the traditional security. I think the big the big theory is for most people in the space that okay I'm doing this now but tomorrow I need the license that's the problem people will sell stuff on the street all the time it's not a big deal but now because it's somewhat like money means you need a license and then these license cost a lot of money which might even be that big of a problem but the problem is that it mostly takes a lot of time so you want to build a business and then you have to like sit there for two years waiting for a hopeful yes that's just not going to work for any startup and we really let's say the proof of stake is happening but we've been having this discussion for a long time I give that something in the point but this is like okay proof of stake that I have tomorrow like it's a different issue and then that would be a big problem and I wish regulations also happened it's really like an incubation file so that people would be ready or can actually modify before it's actually stepped into the regulation yeah so so usually regulators take this approach like if the ecosystem is small enough then just ignore and then if the ecosystem reaches a certain point or level of the importance in the society or the system we need to regulate so this is a ticker like attitude but I think it's sometimes it's better for the ecosystem because they can at least reach certain level of importance and then if it's become important probably you have some negotiating power with the regulators that's a lot of important things but at the same time as you mentioned I thought that there is really things we need to avoid so if we have open platform to discuss these kind of issues among regulators, engineers or even the businesses these kind of issues it is very good for to understand what are your concerns and then we can talk together to come up with like better way to deal with this issue so if it's a community just ignore probably it's okay like regulatory sandbox not regulatory kind but it's not ignoring but still we can give some freedom to experiment if you have more like guidance or clear framework from us on the some issues probably we need to make some effort within the regulatory community to come up with how we should deal with pro-hosting or something so at this moment we are in the middle of the kind of haze or fog or something it's very difficult to understand what is happening and what is important for the community so if we have open channel to learn what is happening and what is concerned even from the community side or the technology side I hope for the community side if the regulators like give some clear guidance or clear idea we are concerned the community may make some effort to help the regulators so this kind of like information sharing and then helping each other to make things smoothly more like more smoothly things happening will be important dynamics so I think we have to make a clear message to the safe harbor but as Yuta said our stress to set the stress is very difficult for us we also understand as the past technological innovation need a kind of safe harbor regulated not touch such areas but we are always thinking of such a kind of concept but always it's difficult to set the stress form to set the safety safe harbor so of course we are concerned about the stakeholders discussion so we would like to set may not be set the stress form but we would like to work to more closely to the kind of innovation side I think the process of the stakeholders discussion is very important to the I think a very concrete point and I would really like to see this in a lot of more departments not just financial services it's actually to hire a department of developers that are part of and watching what is going on because on the end everything in this space to 99% is out of the open actually the internet is very expensive so that is a problem as well so I'm not sure but the great competent engineers competent engineers very expensive or as high as the shortage of talent is common like issues not just in the internet but also in the entire ecosystem so we need to have more engineers as an ecosystem and then if there is a kind of if we have lots of engineers probably we can hire some of them but at this moment it's very difficult to hire you can just raise the tax that is a good point arguably there's probably immense value to having more engineers about the government so it might be worth it thank you you've made my job as a moderator very very easy but you're the most important part of this panel so I wanted to take an opportunity to open it up for questions you can have a stack of questions but please hello my name is Jacek I work for Makered Outs legal council your presentation at the beginning was really great it was excellent to see such good understanding of the problems and challenges that are being posed by decentralized finance and to be honest after interacting with quite a few regulators that was really excellent so please continue this work especially at this level of standard setting bodies so that all of these guys actually understand what's going on and see this not just as risk but a certain new paradigm that might happen at some point of time might become reality and mainstream and I think that this idea of interacting with stakeholders and the forum stakeholder forum that you mentioned for next year that's what we need and you like some may think that there is no like counterparty or like discussion participants from the other side from the different side but actually today I was leading a workshop called legal troubleshooting for DeFi projects and I was presenting certain problems to the community of people that gathered at this workshop legal problems for DeFi and I was using them for solutions and actually those that were winning options in these polls I was doing were like educate regulators engage in transparent dialogue with law makers things like that try to influence and change the laws these were like the winning options so there is I feel very strong willingness in the DeFi community and broader speaking launching community to engage in this dialogue in this dialogue as well to try to tackle these problems that you are applying that might seem unsolvable right now but you know these are the most fundamental societal problems or challenges that we somehow need to solve right if that's gonna happen we'll just need to do that and like things like this panel and the discussion like the one that you're organizing at this stakeholder forum is just necessary and I think that everyone understand this I think sorry that was not the question great feedback so I would like to just add one thing to this Moody's Make Program so the benefit before having developers and I think there are ways to motivate them is that Ben Adon is saying hey sit here and look at the internet but actually you have to also contribute open source things come up with good ways of making smart contracts for safe investment or whatever because if you give them good tasks these people are happy to join because they want to work on interesting problems if they are now there to be the Kitta watchdog they probably are not liking that job and neither would anybody want to have them or not so if they contribute then it's useful on the Moody's Take all the aspect I mean what I'm seeing is for example that there are panels made here for example like this the problems with this is like 40 minutes short talk maybe even in public with other people so it's not real fast discussions and if you then do like five panels over two years you have to exchange very little information in these two years you know because there's like five meetings so what it actually requires is after all in-house developers basically being on the scene helping out themselves developing ideas themselves in the community then they are always on the tab and then actually having inviting for for example one day let's sit together and discussion on a more internal basis because there's a lot of people who have ideas and they would like to talk about these things but it cannot be that obviously super standardized form it has to be just a room and then people talk so could you please outline in a short word how do you imagine how do you see from what you know right now the regulatory position overall in ten years and what do you think would be the like your role like your party role in that coming the truth and coming to reality because it's very interesting how the different angles of this so that is a very good point because in ten years probably decentralized system will be much larger and then probably the regulatory like landscape or role of regulation will be changed as Fabian mentioned part of the regulation or regulatory enforcement will be replaced by technology some people call this as a coder's road I think it's too broad part of the controlling system will be replaced by the technology called itself in that sense regulators need to like have ability to get into the core development as well all the engineers have certain level of understanding the social issues or just catching up this pattern change so kind of the core development itself will be the product so coder's self represents some of the values like how much anonymity or privacy like appropriating the society this kind of thing so there are certain products in the core development itself but at this moment from the engineering side it's reflected into the core but I think it's it's a little bit too dangerous because the other perspective from the regulators or consumers are that other perspective from the society is not reflected in the core but still the coder act as kind of the controlling system so we need to change the political system or regulatory system according to the social change of the that takes a long time not within one year or two years but maybe in 10 years we need to think about this kind of change I don't know if the code necessarily at least the core protocol necessarily reflects the engineers intentions other than making something generally extensible and programmable obviously the technologies that we built on top reflect our intentions and engineers are the main ones designing the mechanisms currently and so I think the regulatory position in 10 years is probably not going to be governing protocols it's probably not going to be governing base layer technology and instead hopefully going to be taking part in standards and the end mechanisms design in such a way that it can help enable society to use these things in productive ways I also think in 10 years that everything will be able to be done in zero knowledge and that most blockchains at that time might even have their core state transitions simply as zero knowledge first to update state routes that are completely opaque to those that are not legislating individual transactions so I'll be happy to have conversations then about how those things work here it's too long for us to think about anything but I think as you said if the recurrence side is going to be more than a block chain then a block chain can create a better example so it can help regulate the government design side too as a YAK I can't really speak about in 10 years really but again we will support the best possible way for ecosystem and if that is something that to provide experts to provide places for discussion that's what we would do where it's me that I would think but but hopefully the technology will be something like a helpful tool for regularity I think like in the next so I'm super interested in the future I'm very much thinking a lot about what's coming and how it's coming 10 years is though a long time frame even though when it happens it happens faster than we think so think about 10 years ago that's like yesterday like 2011 that was like around the corner how it feels but I think as a society there's a lot of big big shifts coming so the digital will be completely immersive see virtual reality in AR people will spend a lot of time in those worlds as well in these worlds block chain will be the absolute core basis this will be the law of nature in these worlds like what do you own, what do you transfer, your money what you can do, what you cannot do the blockchain can govern everything here in the real world the blockchain can govern only in so and so much because there's still like the physical world in these digital realms it's 100% I think definitely as the society is moving towards a very much more digital age regulators have to become programmers I mean I think it has to be I'm sorry to say that but it has to be a requirement to go and to understand and to actually participate in these open discussions and one of the things which open source shows us is that you can have open discussions about a lot of very important things and today it's not anymore like little games but it's like more than a billion dollar ecosystems that are in public disgust and it works pretty well in such a in a way I mean deserve obviously a lot of process it could be more organized or structured but it's at least already very transparent so I think the future regulators will understand that certain roles it right now does are not necessary anymore as such because the systems just work different so you can build worlds in that makes systems safe by design so a certain set of regulatory needs is not even required anymore and actually being part of the mechanism design the crypto economics because I think this will be a very big part of our political, discordant society, governing society will be thinking of those systems in the right way so after 10 years we are still fighting with the new Chinese maybe yeah so as soon as the discussion that round table our last match so we are you know we invited the engineers academics and expert of security so I think we can access to the relevant person of the such kind of area but finally we have discussed in round table so who represents the user side so maybe user motivation is very changeable so of course we can already change the services but on the other hand so users change the service itself so after 10 years ago so we have smartphone first so during 10 years so we change the financial services so maybe after 10 years we can change the services so we are maybe fighting with the new challenges maybe maybe inviting the users of some things that are okay thank you, thank you for that with some house changers as a strategy advisor and I found that there is a missing picture missing part of the picture so some of those key exchanges like Binance and OK Act and 4B they are not actually invited to join this kind of discussion and although there are a lot of those something like the malicious manipulation of the price and the mandatory issues are around here but still those guys they are somehow like a portal for a lot of those comments entering the token world so I would like to know your ideas whether you somehow like those bureaus or those kind of agencies are going to collaborate or cooperate with those key exchanges to shape the future coming regulatory environmental situations for all those kind of those issues regarding kind of the tokens or you are going to just leave those guys aside just nowadays they are actually quite passive so we would like to know your ideas it's a very good question so I think you know we are regulatory authority so we have to be fair in treatment so I think we impose the regulation to the crypto exchanges so we have some conflict so because some exchanges you know provide it kind of the under the process of the registration to our agency so but we are we have such a conflict but of course here we would like to discuss with the major exchanges so we would like to know the the concern of the businesses is posited by the exchange of services so we we have two challenges in organizing the stakeholders so so I think it's better to organize it's better for academic sites they are very neutral so I think it's better to better for you know academic kind of people to organize the kind of the kind of stick for the discussion so I think relatively going to be relatively fair so this is a my my service maybe I have a short addition to this the bottom of the academic site I see that they are actually pretty far behind that whole thing as well I mean you think academia is the one on the cutting edge and they are doing all the research but the truth is that just catching up to what's happening here in the blockchain space they are almost like the government institution some small groups which are a bit more advanced like MIT lab and so on but that's very few people I think like inviting so if the university is inviting these groups to make discussions I think that's useful I personally think I know like agencies like this have to be neutral by design and because it could be the potential scene that you know this exchange tries to influence the regulator which doesn't do its benefit but I think actually everybody should be invited and it should be openly talked and it doesn't matter from which side because on the end the talk is open and then you can see if somebody got like influenced or moved the package of crypto coins over the exchanges are only right now there are very obvious places to regulate like these there they are on and off ramps for most users but the more and more the assets and contracts and just general activities built on top of these systems they might become less and less important from kind of like they might still serve some sort of economic purpose in their place to regulate but they might not be like the the kind of golden gates that you would regulate everything I agree I agree with the discussion should be open to everyone so if the exchanges want to join our discussion we wish they should do and also I'm not sure how the decentralized exchanges will make these widely spread out in coming two or three years because there are lots of issues but as as you mentioned like exchanges are still very important part of the ecosystem in terms of the regulation because in the system basically exchange is the only one place to regulate so if we eradicate exchanges from the ecosystem we cannot regulate it on one hand we need to protect in this sense we need to promote exchanges but at the same time so we need to have some centralization to regulate but at the same time we cannot like dictate the control or the development so if the exchanges become less important maybe the challenge will be much bigger than now for us it's very complicated in the ecosystem so the regulator has exchanges and decentralization it's an interesting topic I think there's no common understanding among regulators how we think about decentralization in terms of the trading platform at this moment the decentralization exchange is very small so we can just not ignore but still we can have some time to learn but I just meant probably it's much more difficult I think it's just that the conversation with exchange is actually we're I think with regulators because before in the case of Japan the regulator is creating a regulation that they're discussing with exchanges of course but the problem I saw when Japan decided let's regulate like with Dan all their like anonymous points and it's all at once without knowing what each token what technology each token presents that part was missing and that's why what was needed is actually the education of learning of what is behind each token and that's not possible just by regulating exchanges and I thought that I was there to come to discuss and mitigate the movement of sex not everything is the same but also this is not going then to to create more agreement also and for more of that things and then there's no discussion about that there as far as I know exchanges the purpose of all this is actually the conversation with researchers and both of us who are actually building things were missing and that's why this is more important so I think we're at the end of our time and I wanted to piggyback on the question about the 10-year horizon connected with your presentation about a 300-year horizon to encourage us leaving this panel to think and perhaps in those terms as well as we think about broader regular first strategies I wanted to thank all of the panelists for participating and especially we would like to thank Miwa-san for not just being our guest here but also being our host here in Japan so thank you, thank you everybody for participating