Web3.0 Study Meeting (5th)

Overview

Date and time: Wednesday, November 2, 2022, from 9:30 to 11:00
Location: Online
Agenda:

Opening
Proceedings
1. Secretariat Explanation
2. Exchange of opinions
3. Launch of Web3.0 Study Group DAO
Adjournment

Materials

Minutes

Date

Wednesday, November 2, 2022, from 9:30 a.m. to 10:55 p.m.

Location

Online Meetings

Attendees

Members

Jiro Kokuryo (Professor, Faculty of Policy Studies, Keio University)
ISHII Natsu Shori (Professor, Faculty of International Information Studies, Chuo University)
Joichi Ito (Director and Chief Architect of Digital Garage, Inc., Director General of the Innovation Center of Chiba Institute of Technology)
Yuko Kawai (CEO of Japan Digital Design Co., Ltd.; Executive Director of the Strategic Planning Department of Mitsubishi UFJ Financial Group, Inc.; Executive Director of the Strategic Planning Department of MUFG Bank, Ltd.)
Keiji Tonomura (Attorney, Nagashima, Ohno & Tsunematsu Law Office)
Kazuhiko Toyama (Chairman of Management Competition Platform IPPI Group Co., Ltd.)
Taiyo Fujii
Shinichiro Matsuo, Research Professor, Georgetown University
Noriyuki Yanagawa (Professor, Graduate School of Economics, The University of

Digital Agency (Secretariat)

Director Kusunoki, Counselor Nozaki

Minutes

The secretariat explained [Material 1] Discussion Materials, [Material 2] (Attachment) Status of Discussions by Relevant Ministries and Agencies, and [Material 3] (Reference Materials) Status of Efforts in the United States and Europe.

The following remarks were mainly made in the free discussion by the members.

I understand that it is generally covered in terms of the composition of issues, but it is important to circulate various mechanisms in the future in an OODA-like manner. However, the Japanese administrative system and the regulation system have become the most rigid positive law system in the world.
In this context, there are parts where it is difficult to turn OODA around, so in the future, it will be necessary to have an entity that moves things on a voluntary regulation, soft law, or principle basis in response to various problems and risks that will emerge around Web3.0. It may be that Digital Agency or people with good sense at the forefront, such as study groups, will always present certain guidelines and renew them according to the situation.
The R & amp; A of golf is a mechanism in which the board of directors of the golf club of St. ANDREWS, which is facing an advanced problem, changes the rules. Shouldn't we create such an entity? Shouldn't we consider whether it is a function of Digital Agency, and if a DAO is to be created as an extension of this study group, shouldn't we do it by DAO?
One prior example is the Corporate Governance Code implemented by the Financial Services Agency and the Tokyo Stock Exchange. It is originally a soft low code, so it is loose. However, because it is intertwined with the Tokyo Stock Exchange Rules, it becomes a heavy position close to a ministerial ordinance, and becomes a hard law, which causes a problem of rigidity. Therefore, one proposal is that Digital Agency and this study group can create an administrative process that can bring in the merits of the original soft law or the merits of the case-law mechanism of Anglo-American law, or regulation process innovation.
In addition, there is a debate about creating an environment that is conducive to innovation in Japan, but as a more fundamental issue of creating an environment, Japan is not currently a level playing field for people who implement innovation, typically start-ups. This is related to labor law issues, tax law issues, various legal systems, and industry practices.
At present, we are conducting a venture capital called NordicNinja with JBIC in Northern Europe. In Northern Europe, 13 unicorns were produced during the pandemic last year, and 11 unicorns were produced by August this year despite the conflict in Ukraine. Japan is aware that only 4-5 unicorns were produced. As I learned through venture capital in Northern Europe, the extremely basic social prerequisites for people who are engaged in innovation in Northern Europe are not much different from those in North America, and it is a kind of level playing field.
For example, most Scandinavian startups are based in Finland, Scandinavia, or Estonia, but most are incorporated under the laws of Delaware, and the Finnish company operates as a subsidiary, which is almost a global standard.
As a problem of infrastructure development, the level-playing field of the startup ecosystem or the innovation ecosystem is not a main theme of this study group, but if the preconditions are not prepared, it will falter at the premise being discussed, so it should be mentioned as a recommendation.
Since Web3.0 space is a dimensional extension of cyberspace, there will probably be many themes that do not connect with existing things.
Rather than contradicting the existing regulation system, a world that is not described as a regulation will appear, so if a regulation is developed for each world, the same failure will probably be repeated. Rather, such a space will be based on what kind of norm the players who are finally participating in it feel source of law to, regardless of whether or not they are willing to join the regulation in advance.
Therefore, even if the country does not come out, it is important that some kind of autonomous regulation of the participating people agree on the principles for the sound development of the world, and create an atmosphere in which such people create the space with good intentions, so can we create such a thing in a different space called Web3.0?
There are two main points. The secretariat materials have already described the story of soft law, which is not based on hard law, but we must dig deeper and think seriously about what we should do to sustain it in this world.
This workshop itself will end at the end of the year, but even if the place where we are discussing it ends at the end of the year, Web3.0 innovation around the world will continue to advance. Since we cannot stop discussing it after next year, we need to think about what to do at the same time to keep it going. The workshop itself or the workshop DAO must be kept going even if the workshop in this Digital Agency is officially over.
Regarding soft law that is not based on hard law, when I talk about Web3.0, the keyword "decentralized" comes up. There is no real decentralization, but there is cooperation with various stakeholders, including the government, with the trust of each of them. As the word "Poly-centric Stewardship" expresses, multiple centers and stakeholders can discuss in Japan or globally with multi-stakeholders. I think the Internet is a successful example, but it is necessary to create such a system. I have started a round table in Japan on a trial basis with Mr. Joichi Ito, and I think it is necessary to rent a place to continue what this study group is discussing.
There is a description of using a place led by private sector, but based on the neutrality of universities and academia, the Ministry of Economy, Trade and Industry or the Ministry of Education, Culture, Sports, Science and Technology will raise some operating funds and make it a place for free and open discussion. I think the WIDE project was close to that on the Internet, but isn't it important to create such a place?
As an example of continuing this in January, you mentioned that Digital Agency will issue an NFT based on his work history, but how about declaring that Digital Agency will enter the project with the authors of the paper by the people who proposed the Soul Bound Token, an immovable NFT, together with Vitalic at BGIN, or with the core members of Soul Bound Token, and join with the people who are working on it the most seriously in the world?
Please seriously consider supporting a global multi-stakeholder location or a national multi-stakeholder location.
In addition, there is a description of information dissemination, but it is weak in information dissemination. If everyone can participate in the global rule-making place on Web3.0, I think it will be bigger than information dissemination, and I would like you to think it important to aim for that.
Another point is about human resource development. The document on September 16, which follows up on the U.S. presidential decree, is drawing attention. In the document, CBDC is the main topic, but regarding the human resource development covered in the document, the NSF and the National Science Foundation, which are equivalent to the JST and the JSPS in Japan, are investing a large amount of money and ordering the launch of research projects on digital assets and cryptography. This means that computer scientists, lawyers, and economists who use cryptography with a Ph.D. from all over the world will be hired in the U.S. from all over the world. As a national strategy of the U.S., since people who can use cryptography will be important as social capital in the future, it should be read that the monopoly of engineers is being carried out as a national strategy, and Japan should seriously discuss what to do with the understanding that the U.S. is taking such a strategy. I think that it will also be involved in the national strategy, so at the same time, we should discuss how to handle top human resources who will contribute to so-called global rule makers, including whether to work with the U.S. rather than against it.
First, as an on-going story, it was pointed out and understood that if we do not create a form of governance that will continue to cooperate with a public entity outside the government, this matter will not go around. Therefore, I will write down my recognition.
It would be desirable if you could brush up on your writing on human resource development.
Soft law and OODA loop are important and linked to them, but the story of crypto assets flows from financial market crypto assets such as exchange and day trading. Therefore, I think that the story of AML and regulation of various exchange will lead to stablecoins and tokens in general. However, the usage of tokens in DAO and in some games is quite different from the concept of crypto assets assumed in the first place.
I think there is still a concept that AML must be done even for 1 yen, but when I actually made a DAO this time, it is strange that I have to do AML to distribute gas bills. Overall, AML and KYC must be dealt with if they are more than a certain amount, but the fact that I have to submit a My Number Card and do KYC to distribute 100 yen and 10 yen brings the context of the world of crypto exchange to DAO.
However, there are not many actual cases of DAOs, and I think various things are emerging at this point when we are trying to create a DAO in Digital Agency. In this study session, among the architecture of stablecoins, overall KYC, and AML, what is practical if they are created with DAOs, the concept of exchange-centered crypto assets and stablecoins, what happens if they are used with DAOs, and whether the same rules are OK, aren't these important? The crypto assets section and the DAO section need to be multiplied, and there are troubles during the actual progress. Here, OODA loop becomes important, but when we do it, there will be details. Perhaps, the framework that has been regulation such exchanges for a long time may be wrong in the first place, so who will create another framework and how will it be considered? If you want to use a DAO in a municipality, you need to unlock it, but it does not work very much in other countries.
The Japanese are conducting experiments in Shiwa-cho and Yamakoshi, so it may be difficult to understand them even if you look at other countries. The Swiss, which is surprisingly advanced, is still centered on Bitcoins and exchange offices rather than DAOs, so there may be no other Japanese institutions that are actually trying to create DAOs, but it is also a chance for Digital Agency to have leadership in the framework, and there is a need. In private sector, for example, there are institutions that are researching DAOs around the world, such as the DAO Research Collective, and DAO model laws and legal scholars published by KOARA, so we may be able to participate.
In addition, I think that KYC will also lead to a distributed identity for private sector companies, but it should be a new architecture as much as possible. Other countries should also look at it, but Japanese companies are in a special situation in My Number Card, and we are wondering if we can really create something usable in the future. So, I'm not talking about the OODA loop I mentioned earlier, but if we don't work on an architecture that works quickly but has flexibility, if we do KYC and AML with a slightly old architecture, the convenience will be lost. I think there will be many ventures in security and KYC, so I would like you to support us.
How much should we separate the discussion of crypto assets from the discussion of DAOs, and how much should we make institutional design by analogy? I think it is a difficult issue whether we can separate them even if we want to, but do you have any opinions or suggestions?
If you do KYC or AML with more than a certain amount of money, you do it at the transaction layer, and if you do regulation in detail, there will be no ventures or how to use DAOs, so I think it is important to cut down on the amount of money. In order for DAOs to grow, you need a lot of tools, and I think there will be open source tools and a new wallet by MetaMask, but for innovation, unless you can move without regulation below a certain point, there will be no ventures or grass-roots DAOs. Stablecoins are important for DAOs, and what stablecoins think and how to use stablecoins in various DAOs are also important.
By far, I think DAO is more important for the future of Japan. Just as trading and e-mail were killer applications of the Internet, exchange was a killer application to launch, but after 5 or 10 years, I think it is an activity that is not related to ordinary people in the world of day trading of money.
The reason why Web3.0 has the most impact on society is that in general, such events as communities in companies using DAOs, departments managing budgets with stablecoins, university research institutes using DAOs, and PTAs issuing tokens and holding school festivals must occur one after another. The timing is difficult because there is a risk that the original social impact will not be used at all due to regulation for limited and maniacal uses. I don't think there will be any DAOs that are truly useful to the world by the time this study group reports, so I think we will have to do DAO design by ourselves, such as using imagination, but it will be dangerous if we don't have an attitude of unlocking the possibility of the future.
I would like to comment on three main points. The first point is that if hard law stands in the way of promoting innovation, it does not seem to be a desirable direction. However, in the sense that discussions on measures against fraud and illicit funds, content protection, and corporate incorporation also clarify internal and external responsibilities, hard law may be the only reason why it is effective in some cases. I think there are three main types, soft law, hard law, and the joint regulation method, but there is a main axis that innovation should be promoted, and regarding which method is appropriate, it is important to objectively evaluate the advantages and disadvantages and risks and carefully examine them in relation to individual points of contention.
Regarding the second point, I felt that security's perspective was somewhat weak in the overall text, but I would like you to add it.
Regarding the direction of future consideration, the article states that it is expected that Japan will be able to develop a content business because of its strength in content. Please also list the direction in which Japan will make use of its strength.
At the end, if the overall message is that it is okay to fail, but we will proceed, it will be a positive development.
The timeline is not organized, and I feel that there are things that happen very early and things that happen right now, and things that need to be done very early and things that need to be done right now, so I think it would be good if we could organize things a little more.
Both the legal system and regulation were mainly discussed in terms of the big future, such as what kind of mechanism should be used to cause a little big future technological innovation. However, in the materials, there are relatively short stories about what and how much laws and changes can be made right now, and both are important, but if both are described in parallel, the reader may be confused.
Especially for those who are familiar with technology, I think they separate what will happen right now from what will surely happen in five or ten years. For those who are not familiar with technology, I think they are confused about when this is happening. This story has two axes, the side of technological innovation, the side of the legal system, and the side of regulation. In addition to this axis, I think it would be good if we could arrange both the present and the future, and the two time axes and the perspective.
In general, the current technological innovation has progressed to this point, so it is desirable to at least be able to sort out the points to be kept.
However, this is a story at this point in time, and it will change greatly in the future. I think that the enlightenment that the current legal system, the current method of creating laws, and the way of regulation will probably not be able to cope with it, or that technological innovation will not occur unless it is changed, is also a very big message of this study group, so it is desirable to state that point firmly.
I would like to ask you to organize the matters that must be changed in the laws, systems, and ways of making regulation by guessing the technological innovation that will occur in the future, because I think that the readers will not be confused and the outlook will be better when it is discussed based on the report in the future.
Since I don't know the time frame well, I don't know what to start with or what I don't need to be careful about right now. From the perspective of people in the financial industry, if they are presented with this material, they will not be able to do much, but they may have to wait and see because regulation may come. Therefore, I would like you to organize the time frame.
It is a paper full of love that wants to promote innovation with proper attention in accordance with the arrangement of the time frame, but it is probably a paper that cannot be read so much by people in the financial industry. It seems to be a tone that can be read as a message that regulation will be imposed on everything that is in front and may possibly come first, regardless of whether it is a soft row or a hard row. There is a concern that if the axes such as regulation regulation in the sense of holding down, the side that promotes innovation, and the idea in the sense of enhancing clarity are not clarified, players may backoff unnecessarily.
As a typical example, when the regulation of crypto assets was decided, although players thought it was very good to include regulation, it is also true that almost all traditional financial institutions did not touch it due to the inclusion of regulation. Therefore, I would like you to consider the writing style based on this.
I would like to point out three points. First of all, since consumer protection starts from the framework of crypto-assets, it can be read in the direction of protection for investors and those who have made investments. However, for producers, there are many aspects in which they are invited or solicited as publishers of NFTs, and I would like to add a direction in which such people can protect actions based on correct information.
Second, as for the sustainability of the conference, the situation and perception of Web3.0 will change every day. I think there will be two or three major upheavals after the conference ends in December, but the contents of the conference will be out of date.
First of all, I would like to request that the DAO created by the Study Group be continued. In addition, although it is stated in the Innovation Promotion Plan that we will cooperate with the conference, it is necessary to fulfill our responsibility to some extent to create a place where we can host a conference in Digital Agency or the Study Group and invite and discuss with experts, and a place where we can invite and discuss with experts and people in the field. I would like to ask you to consider hosting the conference voluntarily.
Finally, regarding human resource development, Web3.0 human resources are often talked about in the line of investors, innovators, and entrepreneurs, but it is necessary to increase the number of engineers who actually work on Web3.0, and to expand the opportunities to obtain correct knowledge and knowledge that is actually working on Web3.0 as much as possible. Whether you like it or not, since this is a project with such a large amount of funds, many engineers will see the word Web3.0. We should provide an opportunity to actually know what the content is. As a proposal, why don't we consider releasing the code of the DAO created by the study group as open source on GitHub this time? If there are materials to learn and it becomes a norm to some extent, the number of engineers who touch Web 2.0 will increase dramatically.
Regarding soft law and hard law, even under the current law, there are so-called regulation sandboxing systems and special provisions for new businesses, and there are systems in which people can try them out in the presence of existing law. There is debate over whether it is user-friendly, but in the field of Web3.0, there may be a specific message that we will promote innovation by using what we have at least as much as we can.
When considering DAOs in various ways, there are exceptions that can be made because they are DAOs as an extension of existing law. There may be a kind of quantitative method of treating them differently from so-called securities by limiting a certain amount and a certain amount of transfer. Another thing is that there are no legislative facts, actual conditions, or examples of why DAOs are treated specially when they are treated specially.
In particular, there are no examples of DAOs for area Creation or social contribution, which are a little different from Web3.0 services, so if there are no examples, it cannot be justified, and an exception for regulation cannot be made, it will remain delayed forever. It may be different from how to reflect it in this paper, but I have an awareness of the problem.
I would like to add the current results to the interactive discussion and deepen it, but I am in favor of framing from the angle of DAO rather than crypto assets, and the point is how to avoid contradiction with the FSA and people who think about financial regulation, and what the FSA has been explaining at that time is basically to return to the regulation Targets and the three major targets of regulation officials.
The three major goals of Financial regulation are consumer protection, financial stability, and financial crime prevention. There are talks about 1 yen, 10,000 yen, and 1 million yen. If we return to the regulation Goals, we should be able to frame them. I think this is a medium-term and long-term story, but it is desirable if we can write that the big message is to create something that is consistent with the goals of the Financial regulation and officials, and from the angle of wider application opportunities, including DAO and non-financial.
The other is about security. It is difficult to keep a complex system using complex cryptography secure, and startups have technological advantages in their white papers, but many of them are probably not secure. That's why the White House is trying to attract cryptographers from all over the world to Responsible Development, Responsible development, which is the title of the executive order in the first place. It is important to think about what is necessary to make the system secure, and to send a message that it is one of the responsible development.
What I would like to clarify here is what will be changed by this technological innovation called Web3.0. In what form it will be possible to change what is required and permitted by law and regulation, whether it will be possible to overcome it, or whether there may be more that is required, but what will be changed is still unknown. It may be unknown to anyone, but it may be impossible to proceed without clarifying it.
For example, when there is a rule that people must play visual inspection with others, if there is a camera and the camera is watching, people do not have to go there. This is because it is possible to realize the same thing as when people are watching with a camera. Even if it is a simple story like this, laws and regulation do not change easily, so regulatory reform is changing them while struggling. If so, what will change due to the technological innovation discussed here or discussed by experts, and what can overcome the existing laws and what is needed in regulation, if we can clearly show them, it will have a great impact.
If we can't do that, when we think about how to change the actual legal regulation, there is a possibility that nothing will change in the world of that side, so we should discuss that.
It is difficult to grasp the specific image of what kind of technology should be focused in the first place and what should be prepared and developed in accordance with the roles to be played by each. There are not a few people who know that they need to do something, but are wondering what to do.
As a member of the financial industry, I believe that we can give more concrete support to private sector's efforts if we can sort out the roles that can be played by each of them in the future discussions, and suggest that the people in each of the roles, or what roles they will play, should at least check this technology.

The secretariat explained the Web3.0 Study Group DAO.

The secretariat will present a proposal to launch the DAO. First of all, I would like to see the purpose of the establishment of the DAO itself this time be for each member to recognize the Issue and potential through the DAO user experience, and to make the discussion of the study group more in-depth.
With regard to the legal status of the organization, we are considering that it will not be launched by Digital Agency, but will be established as a voluntary organization based on the voluntary will of its members and secretariat, and will be able to make various decisions independently.
There are various DAOs, but in this case, at least, I want to start by distributing tokens and actually voting. In addition, for example, it is possible to issue some kind of certificate or write it on the blockchain, but I want to increase it by receiving opinions after it is actually launched.
The role of the agency is to launch and operate the DAO first. Since gas bills are required at the time when transactions occur, such as when they are actually written on the blockchain, the agency is in charge of gathering and processing the actual writing on the contract.
As a member, you need to open a wallet to receive tokens and vote, so please open a wallet. If you use one that you already have, please tell us its address. If there are people who actually participate in the DAO and can help us on the management side, we would like to ask them to help us, participate in the discussion, and share the cost of gas as a voluntary organization.
As for the members participating this time, the members and the secretariat participating in the Study Group will participate. On the other hand, as a form of DAO-like decentralization, it is considered that the target will be expanded to include the members who have been allowed to participate.
In terms of specific outputs, various discussions have already taken place at the time of the launch. In the future, we believe that it will be a role model for the government to be involved in the DAO, so we are considering disclosing the materials used at the time of the launch.
I believe that the actual experience will deepen the understanding of the DAO itself, so it may be expected that the DAO itself will improve the future output of the discussion. In addition, there are points of contention about how to collect tokens, so it may lead to recommendations based on specific use cases.
This time, as the scope of the project, we will continue to operate the DAO until the end of the workshop. I would like you to discuss what to do after that. Since there is a possibility that this DAO itself will be a place for rule-making in the future, I would like you to discuss how to keep it if it is to be kept.
The following are the points I would like you to decide first when launching.
Is there any problem if you share the cost of tokens and gas equally? Is it okay to start with the current members of the Study Group, but gradually expand the idea in the future? In addition, what will be used as a function of the DAO? Is it okay to issue only governance tokens at first and discuss them while deriving them in the future? And, in general, the DAO community often uses Discord, so is it okay to use Discord for future exchanges?

Questions and answers below

Member: tokens. I have a self-policy of not having any crypto assets such as Bitcoin or Ethereum. I do not hold them because they are academic neutrals or because I do not have them because I think they are intended to raise the price of my paper. I would like to know how the token will be treated this time, or maybe it is an exception for me, but if you have an image, please tell me.
- Secretariat: We are excited that the If you have any opinions, I would like to ask you. One possible method is to distribute NFTs so that holders who hold them can vote. Another possible method is to issue a certain number of tokens that can be used by the community, which do not lead to monetary value, if you imagine use cases to be sent and received within the community. Isn't it either of them?
Member: There is no problem if I do not have a monetary value, so I would like to consult with you again. I have no objection to the burden of gas charges.
It is a different story depending on whether it has a monetary value or not, and in the end, when a DAO has various tokens, it seems to be due to the incentive mechanism of the entire operation of the DAO, but how can it be structured?
Member: Soul Bound Token. I believe that Soul Bound Token and stablecoins will probably be very important mechanisms when a private sector non-profit organization establishes a DAO. It would be desirable to be able to set a model here.
- Secretariat: We are excited that the Discord, communication has started on Slack, but it is desirable to use transition, so there may be a point that it is not a problem. Please understand that we will contact you when we actually launch it, such as telling you the address of your wallet.
Member: There is a feeling that it is desirable to be able to play a part in the governance of on-going after the Study Group ends. How to create such a thing should be discussed within the DAO.
- Secretariat: We are excited that the Soul Bound Token is good, and we sympathize with it, but since it is still in development, it may be better for the Secretariat to conduct a survey in the future to see if it can realize what we are trying to do, including the ecosystem of tools. In terms of the purpose, we received a proposal that it may be possible to make it non-transferable like the Soul Bound Token, so we would like to communicate with you about how to proceed separately in the future.
Member: Shouldn't we start with a reality and then evolve it if necessary? Then, I would like to proceed with the launch of DAO.
The secretariat explained that the next workshop is scheduled to be held on Tuesday, November 8.
The secretariat explained that the minutes of the meeting will be published after the members confirm the content.

End