Event Report
DeFi meets TradFi: Exploring the Future of Finance through Web3
Highlights from the Panel Discussion
On April 21, 2023, CoinDesk Japan hosted the event “DeFi Meets TradFi” (participant introduction and event report). As Web3 has been formally established as a key component of the Japanese government’s growth strategy, it has attracted considerable attention. This event represented the inaugural endeavor with a specific focus on DeFi. Politicians leading the Liberal Democratic Party’s Web3 PT, Web3-startup founders, representatives from world-renowned DeFi projects, major financial institutions, and legal experts all gathered to exchange opinions from both technological and regulatory perspectives. In this article, we present some highlights from the lively panel discussion. (Japanese transcript here)
Keynote Speakers
Juan Benet: Protocol Labs Founder & CEO
Charles d’Haussy: dYdX Foundation CEO
Akihisa Shiozaki: Liberal Democratic Party, Deputy Director of Digital Society Promotion Headquarters, Member of the House of Representatives
Panelists & Moderator
Masakazu Kikuchi: Founder & CEO of Secured Finance AG
Hideaki Kudo: Executive Director, Digital Asset Promotion Office at Nomura Holdings, Inc.
Yuji Kawada: Senior Researcher at Mitsubishi Research Institute
Masafumi Masuda: Partner Attorney at Mori Hamada & Matsumoto Law Office
Midori Kanemitsu: Head of Crypto Strategy Dept. at bitFlyer Inc.
Path to DeFi Adoption
Kanemitsu: I’d like to move on to the topic of the path to DeFi adoption in Japan. When we actually reach the phase of widespread adoption, as Kudo-san briefly mentioned earlier, what will be required from each of your perspectives? First, I’d like to hear from Kikuchi-san. What does it mean for DeFi to become widely adopted in Japan, including its definition, and what needs to happen to get there?
Kikuchi: Well, when we talk about DeFi becoming widely adopted in Japan, it’s not that we want to promote it at all costs, but rather, as a new asset class, cryptocurrencies have very unique characteristics and are very attractive investment targets. There are investors who want to gain exposure to them. Financial institutions will find a way to package this exposure into products. As structurers, we don’t really care about the form: deposits, bonds, funds, or direct exposure — whatever works. The challenge lies in how to cater to customers who want a specific risk profile.
Japan is a very interesting market, struggling with extremely low-interest rates for a long time, so even slightly higher rates are very appealing. Securities firms and others have come up with innovative bonds and other forms of securities that are very popular. One approach is to sell exposure to cryptocurrencies through existing formats. I think that’s possible.
When thinking about more general examples, I often compare it to cooking. You can go to the market, buy apples, vegetables, and cook your own meals, which is like directly accessing the market and making transactions yourself. That’s fine and enjoyable. But that doesn’t mean all restaurants will go out of business. There will still be professionals who can combine ingredients and serve the most delicious dishes at the right time. In the same way, I think Japanese financial institutions that are well-versed in the Japanese market and have proper regulations in place can help spread these products widely.
Kanemitsu: I see. So there’s a significant expectation for the traditional finance (TradFi) players. After hearing this, Kudo-san, what are your thoughts?
Kudo: Yes, I agree with that perspective.
Kanemitsu: Thank you. Moving forward with this worldview, I’d like to ask Masuda-sensei: how do you think the Japanese regulatory authorities and those responsible for making the rules are thinking about this, and what do you think will happen?
Masuda: That’s a tough question. Well, I believe that DeFi itself cannot be stopped and will continue to emerge. Moreover, I think there’s a high possibility that it will cross the chasm as soon as attractive products and interfaces appear. So, from a regulatory standpoint, the question becomes how to achieve their goals, such as preventing money laundering, in this context. Existing financial regulations involve registering and licensing businesses, understanding who they are, and controlling them by imposing obligations such as transaction verification requirements under anti-money laundering laws. This approach has been used in the financial world for a long time, even before the Internet. There is a fear that this could disappear the moment DeFi comes into play, and regulators probably have that concern.
I remember going to a conference in the US in the spring of 2019, where Korean authorities gathered to discuss DeFi regulation and the so-called RegTech. When I asked everyone how they thought about points of control and what they considered important, there was a moment of silence. Frankly, it was a topic that no one knew how to regulate back then. I still don’t have an answer, and I believe that regulators themselves may not have one either. However, one thing I can say is that, like the internet, DeFi already exists and cannot be stopped, so it’s unlikely that the protocols themselves will be regulated. Therefore, the focus should be on the application layer, and regulators need to determine where within that layer they can effectively implement the regulation. They must constantly catch up and stay ahead of the private sector, which will continue to develop if left unchecked, and I imagine that this must be an incredibly difficult task for them.
Global DeFi Regulations: Current State
Kanemitsu: Thank you. I would like to ask Kawada, as Professor Matsuo and Ushida have been conducting DeFi research meetings within BGIN, focusing not only on protocols but also on application layers. To the best of my knowledge, there are discussions on how DID could be helpful in regulating DeFi, among other topics. Since 2019, when Mr. Masuda attended a meeting, how have global regulators been approaching DeFi regulations, and what are the current thoughts and debates on this subject?
Kawada: In the conferences I have participated in, the Financial Stability Board (FSB) has been the primary focus, and the situation has not changed much. It’s still uncertain how to proceed. However, the discussions have become more sophisticated. Even though some claim to be DeFi or DAOs, many are, in reality, highly centralized. So, some authorities argue that this doesn’t mean the regulated entities have disappeared, but rather it’s a matter of enforcement and dealing with offshore businesses, which have been around for a long time.
Of course, there are counterarguments that focus on how to handle fully decentralized systems, which will likely be discussed by the FSB and others this year, with international standards expected to be published next year. Since these standards don’t apply directly to each country, they will serve as a reference for each country to develop its own domestic laws. There are several key points to consider during this process. One is technology neutrality, which means regulations should apply to services that use technology, not the technology itself. This is a very strong assumption rooted in the history of the internet. Another principle is “same activity, same risk, same regulation,” meaning the same rules should apply to the same activities and risks, regardless of whether it’s TradFi or DeFi.
The third principle is proportionality, which means regulations should be proportional to the risks involved. Risk assessments vary between countries, and Japan, for example, has experienced significant risks at times. However, other countries might not view the risks as severely. The FSB officially declared last year that these risks could pose a threat to financial stability, so the required level of regulation has become quite strict even considering risk proportionality.
Finally, there’s the principle of avoiding prescriptive international rules. If rules are too detailed, people tend to engage in regulatory arbitrage, exploiting loopholes. So, rules should not be overly detailed, and this also allows for flexibility when countries develop their domestic laws. On top of these four principles, different sectors have additional considerations. For example, the FATF, which focuses on anti-money laundering, employs a “catch-all” approach to cover everything, resulting in the broadest definition of “crypto assets.” Other organizations, like the Basel Committee on Banking Supervision, IOSCO, and IAIS, may have different approaches for securities, insurance, and so on.
In that sense, as I mentioned earlier, it’s unlikely that a developer who merely creates and deploys a technology, without offering financial services, would become subject to financial regulations. However, if they are running it as a business, continuously providing financial services after deployment, or somehow generating ongoing revenue, they would fall under financial regulations. This scope of regulation is often called the regulatory perimeter or the point of control. Deciding where to place the regulatory perimeter, for example, in the case of Uniswap, Uniswap Labs develops and deploys the platform. Although there is a governance token, founders and the development team hold a significant portion of it. This means there is a high concentration, so Uniswap Labs could potentially be within the point of control or regulatory perimeter.
However, as you mentioned, Uniswap Labs itself doesn’t provide financial services directly, so what should be done? In some cases, instead of directly regulating DeFi, further regulation could be applied to on-ramps and off-ramps, which are the usual points of entry and exit for users. These kinds of discussions are currently ongoing, but there is no definitive answer yet. Including Uniswap Labs within the regulatory perimeter, for example, would significantly conflict with the principle of technology neutrality. So, it’s a challenging issue with no clear path forward, and that’s the current global situation.
Is DeFi a threat to TradFi?
Kanemitsu: Thank you very much. I learned a lot from this discussion as well. Thank you both. So, in terms of the adoption of DeFi, I found the discussion about Secured Finance very interesting and I hope it becomes more widespread in the future. I’d like to ask the three of you, starting with Kudo-san, from the perspective of TradFi, do you see Secured Finance as something that could potentially take away business from existing TradFi, or as a threat, or something that would bring in entirely new customers? How do you view it from the perspective of TradFi?
Kudo: I think this is a completely new area, and, well, DeFi and TradFi are literally polar opposites. DeFi is extreme, and in a way, so is TradFi, realistically speaking. So I think there will inevitably be efforts to bridge the gap between them. Looking at the yield curve earlier, I thought it was amazing, and cases like that, as well as real-world assets, will continue to emerge and accumulate practical examples. The next step is building trust. I think we’re still in a phase where we’re trying to build trust, and as trust accumulates, the two sides will come closer together. I believe that a new market will expand in that space, rather than taking away from the territory of TradFi.
Kanemitsu: Thank you. Kikuchi-san, what are your thoughts on this?
Kikuchi: Yes, I don’t think there’s any competition, but rather it’s an opportunity for expansion. So, I’d really like both sides to welcome each other and come closer together. When it comes to creating yield curves or markets, when I used to work for a financial institution, everyone was very busy with their daily tasks, and they didn’t really understand why the market was the way it was while they were just making money day by day. But when you become the creator, you start to see things differently and wonder what the nature of DeFi is and what cryptocurrency is all about. One thing I realized was that there is a market that looks very similar to the seemingly elusive cryptocurrency market, and that is the Eurocurrency market. Eurocurrency is not the Euro currency, but rather a currency that is not in its home country. Euroyen refers to yen that is not in Japan, and there are things like Euroyen bonds. There are also dollars that are not in the U.S. and not subject to U.S. regulation, and the interbank market is almost entirely based on Eurodollars. Traders prefer it because it’s not distorted by artificial rules and provides the most neutral, efficient, and economically sensible market. As a result, it has been very useful in practice, and it has low costs. So, although there may have been a moment when some people thought all unregulated markets should be crushed, that debate has been going on for decades, and now everyone is using those markets. I think this kind of discussion can be applied to how we regulate cryptocurrencies today. While I believe that the complete solution will likely involve us continuing to have these discussions, I think we will also find practical landing points along the way. The earlier mention of offshore markets is exactly right, and I think the process of finding a balance with domestic regulations in each country will involve packaging and localizing the offshore market through regulation to provide it safely to customers. I believe that the traditional market’s formation is entirely applicable, and I expect it to develop in that direction.
Toward Mass Adoption of DeFi
Kanemitsu: Thank you. That’s interesting. Indeed, the similarity to the Eurocurrency market is a new discovery. I’d like to ask Mr. Masuda about this. Secured Finance has been growing tremendously, with around 50,000 users. What do you think regulators need to do to promote mass adoption of this? And what happens when mass adoption takes place?
Masuda: Well, the main concern is probably money laundering, and even if the market itself exists, it’s important to know how people who engage in transactions will be involved. In a DeFi-like world, people might want to trade directly with unhosted wallets, and the question then becomes who can control that. I think that will be sharply questioned. I know it’s a repeat of what we discussed earlier.
Kikuchi: Being sharply questioned is something we welcome, and we have great respect for the regulatory approach. The market has developed thanks to that. For example, in BIS reports, there’s the concept of Embedded Supervision, where developers, like myself who is both a TradFi and an engineer, understand the meaning of regulations, grasp the objectives, and embed them in the source code. I think we need to show our commitment to self-regulating and finding ways to create the safest market possible. Otherwise, we won’t find common ground. As for regulation, I think it’s not just about putting on the brakes. For instance, in the interbank or interdealer market, there’s an interesting rule that you can’t know the other party’s information before the trade is done. This is prohibited because it could lead to market abuse, undermining healthy market and price formation, and market integrity. Once the trade is done, you can know. It’s quite the opposite, isn’t it? I think such rules ensure transparency and create a healthy trading environment.
Masuda: I’d like to add that regulation and national policies can do more than just impose restrictions. As Mr. Kikuchi mentioned, the role of the legal system is to provide appropriate incentives. For example, suppose a DeFi platform emerges that accepts only unhosted wallets with proper identity verification, using Soul Bound tokens or similar, and confirms the user’s identity during transactions through two-factor authentication. In that case, tax incentives could be provided for those who trade on such platforms. By offering positive incentives, policymakers can guide the market in the desired direction. This is more than just a matter for regulators; it’s something that those at a higher level should consider when designing incentives.
Expectations for the Future of DeFi
Kanemitsu: Thank you for the fascinating discussion. As we’re entering the final part, I’d like to hear from each of you about your perspectives on the near future of DeFi and how you perceive it. There might be various ways to look at it, such as the recent Silicon Valley Bank collapse leading to an increase in crypto asset prices and DEX volume, or as an anti-centralization movement, and the reinforcement of DeFi interoperability mentioned earlier. I’d appreciate it if each of you could share your thoughts on what you expect from DeFi, how you think it will evolve, and its implications for Japan. Let’s start with Mr. Kudo.
Kudo: That’s a tough question. As it’s a new form of finance, I expect it to break new ground in the financial sector. Traditional finance has developed a sophisticated structure throughout its history, with regulations and customs built upon it. As a result, it’s hard to take the next step. In this context, DeFi has emerged, offering new perspectives. While technology is currently at the forefront, I believe services will eventually ride on it and expand. Initially, similar services from the TradFi side will move onto this platform, not just cryptocurrencies but also services and products. I truly expect a real market in the middle ground to emerge in the future. That’s what we’re keeping in mind as our company is entering this space.
Kanemitsu: This is a personal curiosity, but your organization is a symbol of financial institutions in Japan, and you’re involved in many initiatives, including Komainu. Could you tell us, within the limits of what you can share, how the company as a whole position and strategizes around crypto assets, digital assets, and DeFi?
Kudo: In that sense, I’ll include DeFi as part of the crypto domain, but for digital assets, it’s a new area we’re currently promoting in the Digital Asset Promotion Office. In other words, it’s an area we’re targeting as one of the next businesses. With that in mind, we’re actively working on security tokens domestically and established a subsidiary in Switzerland last year for crypto assets. We’re about to launch services, so we’re committed to developing it as a solid business.
Kanemitsu: Thank you. Mr. Kawada, from your expertise in global financial regulation, what do you expect from DeFi personally, and how do you see regulatory authorities reacting to it?
Kawada: Yes, well, if we consider DeFi, including cryptocurrencies, when we actually look at the market, during last year’s collapse of Terra, Binance USD, Tether, and such, their values quickly decreased. But this time, with the Silicon Valley Bank, and even before that, Silvergate Bank, starting with Silvergate, Signature, and then Silicon Valley, we see a situation where, on the contrary, the value of USD Coin is decreasing, while Binance and Tether are increasing. I think the role of a safe haven, or a refuge for crypto assets as safe assets against TradFi, will continue to emerge. However, as I’ve been repeating, without proper safeguards, customer assets will not be well protected, and leverage can be applied quite heavily. Collateral can be re-chained over and over again, resulting in a chain of collateral, and the degree of leverage in the entire DeFi market is not very well understood, to be honest. So, the risks are too high, and on top of that, collateral liquidations are done all at once with algorithms, which means that there are no safeguards in place, although this depends on the protocol. So, I think it’s essential to create proper safeguards, first and foremost, for investors to use with more confidence.
As for the functions of DeFi, I’ve heard many interesting discussions today, but basically, DeFi is doing what TradFi does, but with a slightly different mechanism, be it trading, lending, or insurance and asset management. So, while it performs functions similar to those of TradFi, it operates differently, for example, in lending, where only collateral-based lending is possible because the counterparty is anonymous. As a result, only those with money can use it, and it is generally said that many users of DeFi today are institutional investors from developed countries. This hinders the potential of DeFi, such as Bitcoin, to be used more globally for financial inclusion and various other purposes. Also, the assets handled are still limited to cryptocurrencies and stablecoins. To increase use cases, it is necessary to enable the use of real-world assets, and for that, legal regulations need to ensure proper ownership transfer and clarify opposing requirements. On the DeFi side, although it has already started, it is necessary to evaluate credit risk more accurately and make more detailed evaluations. This will allow for more refined control instead of simply pooling assets, which will further develop DeFi. Finally, I think it is essential not only to simulate the functions of TradFi completely but also to create unique functions specific to DeFi, such as flash loans, which I find fascinating. Although they are often used for malicious purposes, they offer entirely new functions that can only be achieved in DeFi and are unthinkable in TradFi. If DeFi has the same functions as TradFi, people will usually use the latter with larger lots and liquidity. However, if DeFi has unique features that can only be found here, that would be great, I believe.
Efforts Towards the Future of Finance
Kanemitsu: Thank you. Mr. Masuda, I would like to ask for your overall comment on this matter. Also, I have known Mr. Masuda for a long time, and he has been very passionate about this field, leading the development of this area in Japan. I would like to know what motivates you, what you expect from DeFi, and how you would like to work on this issue in Japan in the future
Masuda: I feel like the bar is being raised constantly, but yes, first and foremost, there is an expectation for finance, and as the word suggests, I understand that finance serves the function of smoothing out society by utilizing some measure of value. Starting from the credit creation of banks, the economy grows, and funds are provided where needed, and as finance permeates various fields, society becomes smoother and the economy grows larger. I understand that the field of DeFi is attempting to brilliantly eliminate obstacles, such as the costs and inefficiencies caused by the presence of operators in the middle.
For example, when security tokens first emerged, it was said that even things that couldn’t be securitized before could now be securitized, starting with the so-called “liquidity of everything” story, and as Mas-san mentioned earlier, anything that can be priced can become a financial product. I think this is the manifestation of the function to further smooth out the economy by expanding the world to places where finance has not reached before.
In this way, I expect that our economic society will become even larger and smoother as finance spreads further into the world through DeFi. As a person who finds joy in serving new technologies that contribute to the improvement of human society’s wealth, I am grateful for these new developments and hope to continue to be involved in supporting them.
Kanemitsu: Thank you very much. Now, in light of these discussions, I would like to ask Kikuchi-san of Secured Finance, which I think is also an example of True DeFi as Charles mentioned, for his thoughts on today’s discussion.
Kikuchi: Yes, today we had very informative and stimulating discussions, and I’ve been talking about DeFi for a while now, but with the theme of “The Future of Finance Changed by Web3,” I’d like to broaden my perspective a bit and discuss how finance will change from Web2 to Web3. I think understanding new tools, such as tokens, is crucial for the new era ahead. And a deep understanding of technology is also very necessary.
Tokens are incredibly useful tools for engineering incentives, as Mr. Masuda mentioned, and I think they’re an upgraded version of stocks. They are powerful and have great potential for development if used skillfully. Regarding technology, there was talk about BGIN earlier, and recent discussions in BGIN involve using technology for new KYC methods, such as Decentralized KYC and Zero-Knowledge proofs, to ensure anonymity while proving the truth. I believe understanding technology and these new tools is essential.
Another point is the keyword Web3, which has expanded significantly. One aspect that attracts me to Web3 is the change in architecture. Web3 first occurred in the IT world, where tech giants monopolized data and abused it, leading to decentralization and empowerment. I see something similar happening in the financial industry. My background is in interest rates, so I remember the LIBOR scandal. It made me realize that if we leave things to humans, mistakes will be made, and everyone in the financial industry should reflect on that. That’s why I believe an environment where we can rely on technology and protocols to be fair, instead of relying on humans, is necessary, and that’s where my genuine interest in Web3 technology comes from. I think the movement towards a fair technology that doesn’t rely on people and reduces trust is what’s happening in finance in terms of the Web3 trend. With a deep understanding of technology and incentives as keywords, I believe we can create the next generation of finance.
Q&A Session
Kanemitsu: Thank you. Now, we would like to proceed to the Q&A session. If you have any questions, please write them in the chat. We received a question earlier that I would like to read out. It says that country-specific dominant KYC/AML solutions for DeFi x KYC/AML are emerging, and each country is expected to use them. The question asks for your opinions on the future of KYC/AML, including regulations on DeFi. Can we start with Mr. Kawada?
Kawada: Yes, indeed. Recently, especially regarding the Travel Rule in the FATF domain, technical solutions have been emerging since the revision of the Crypto Asset Guidance in 2019, and various private solutions are gradually maturing. At first, people in the private sector said that it was impossible, but the FATF has held outreach meetings, issued detailed guidance, and conducted annual implementation monitoring, and private solutions are gradually developing, though not yet perfect.
There are already existing solutions for KYC and CDD, including eKYC. So, I’m sorry, I didn’t quite understand the intent of your question, but in any case, I think that new tools, such as DID or decentralized identity for distributed identification, will continue to emerge in the future to meet the necessary AML/CFT regulations while protecting privacy.
Lastly, I forgot to mention BGIN earlier, so I’d like to touch on that now. Unhosted wallets are particularly challenging because individuals use them, and as I mentioned earlier, individuals who don’t handle them as a business are not subject to regulation. In that case, P2P transactions, according to the data from FATF, account for more than half of all transactions. Therefore, unhosted or self-hosted wallets are crucial points to address, and how to provide safeguards and prevent illicit involvement is an issue that cannot be resolved by regulatory authorities alone. It is fundamentally beyond the scope of financial regulation. Cooperation from developers, wallet developers, and insights from private crypto asset exchange operators are also necessary. Japan has been proactive in this regard, launching BGIN (Blockchain Governance Initiative Network) in 2019 during its G20 presidency, adopting a multi-stakeholder approach where various people and stakeholders gather to discuss and address particularly challenging aspects of financial regulation.
The Financial Services Agency of Japan is participating as one of the stakeholders, and new technological solutions are being discussed within BGIN. If you’re interested, I encourage you to check it out.
Kanemitsu: BGIN is open to anyone, right? I once joined a session but fell asleep as it was late at night.
Kawada: The time difference is an issue. Mr. Kikuchi experiences this as well.
Kikuchi: Yes, that’s right. It’s open source and open to everyone.
Kanemitsu: We have a very technical question. In the traditional derivatives finance world, ISDA-centered collateral management systems dominate. We would like to hear your opinions on the compatibility and competition with the blockchain industry in the future roadmap regarding collateral management. Mr. Kikuchi, could you please share your thoughts on this?
Kikuchi: I really like the concept of ISDA, and we’ve been working on making DeFi compatible with ISDA from the beginning. However, since it involves contracts, we’re doing it in a way that fits DeFi better. The name Secured Finance implies that all credit risks are secured, and we’re asking for collateral to be provided. So, when it comes to collateral management, we learn from the detailed rules of ISDA, such as collateral netting rules, and implement them into our protocol. I think this makes the compatibility extremely high.
Kanemitsu: Thank you. Now, for the last question. When large corporations enter the Web3 space now, one of their goals may be to capture first-mover advantages. However, isn’t this centralized? Is it wrong to aim for first-mover advantages, and what are your thoughts on this? Kudo-san, please.
Kudo: At this stage, I’m not sure what the first-mover advantage is, but I think it’s something to consider. A common pattern is that while it may be called a first-mover advantage, it often turns out to be a first-mover cost. So, I think we need to look at whether we can combine our strengths and live by them before diving in.
Kanemitsu: Thank you. Now, let’s move on to the closing remarks. Today, we heard from Kikuchi-san of Secured Finance, who is competing in the global DeFi market, Kudo-san, who is looking at DeFi from the perspective of traditional finance, Kawada-san, who is well-versed in global financial regulation, and Masuda-sensei, who led the creation of Japan’s Web3 whitepaper. We would like to hear your one-sentence impressions of today’s discussion and any additional thoughts you may have. Kikuchi-san, please start us off.
Kikuchi: Since Web3 is new, I think it’s best to keep trying, especially in finance. Regarding the earlier question, Web2 might be about gathering money in the center and benefiting someone, whereas Web3 is about using protocol incentives to generate revenue and how to distribute it. Web2 is like a pyramid, but Web3 is much flatter, focusing on distribution. So, in that sense, it might be somewhat centralized to take all the first-mover advantages, but I think it’s great to be an early adopter, and I hope people will continue to challenge themselves.
Kanemitsu: Thank you. Next, Kudo-san, your closing remark, please.
Kudo: The title of today’s event is “DeFi meets TradFi,” but from my perspective, I see it as “TradFi meets DeFi.” As I mentioned earlier, I think there’s still some distance between the two, but I believe we’ll be able to shake hands in the not-too-distant future. I hope that both I and the community can contribute proactively towards that goal. Thank you.
Kanemitsu: Thank you very much. Now, Mr. Kawada, please go ahead.
Kawada: Yes, today’s discussion has been very interesting and meaningful for everyone. My main topic was about international regulations, but I think it’s more enjoyable to understand the background when you look at various global news related to cryptocurrencies. I hope you find it helpful. There’s one thing I forgot to mention earlier: when thinking about the future of DeFi, we need to consider various developments. As Mr. Kikuchi said earlier, we always need to broaden our horizons.
For example, CBDCs are currently in motion, right? The UK and the ECB are expected to issue them around 2025, and there’s movement on that front. Since the Libra shock in 2019, major countries, including the Financial Stability Board, have been working on a massive project for over six years to improve existing cross-border payment systems and lower costs while increasing efficiency. There are also developments like this. Recently, I was most shocked by ChatGPT. After all, with generative AI, many are being developed, but when something with such an impact suddenly emerges. So, I personally think that the future will change in various ways due to various impacts and incidents.
What I’m personally very interested in right now is ChatGPT, generative AI. When it comes to Web3, we might only be able to use Web2 because resources can’t be loaded, but how will this affect DeFi? It could make creating smart contracts and audits easier, or enable interactive blockchain analysis. I think there will be countless use cases, and I’m looking forward to seeing groundbreaking examples like when I was shocked by Uniswap.
Kanemitsu: Thank you, Mr. Kawada. Finally, Professor Masuda, please go ahead.
Masuda: Yes, as I mentioned earlier, I’m active in various ways as someone who believes in the future that technology brings to humanity, and I consider blockchain and DeFi as part of that. In general, when a divide arises between engineers, technologists, and policymakers, undesirable regulations are born, which humanity has experienced for a long time. I also want to avoid such situations and continue to work on smoothing out the world by standing in between. Today’s discussions have been very stimulating, and I appreciate the various insights.
Kanemitsu: Thank you, Mr. Masuda. I also think that although I may not be able to work with DeFi in my job for a while, I will continue to follow its trends as a fan. It was very interesting. Thank you. With that, we will conclude this session. Thank you to everyone in the venue and those who have been watching.
[Applause]
Archived Video
You can enjoy the entire event, including the keynote, on the archived video at this link. Please take a look.
