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Web3.0 Study Meeting (6th)

Overview

  • Date and time: November 8, 2022 (Tue) from 9:30 to 11:00

  • Location: Online

  • Agenda:

  1. Opening
  2. Proceedings
    1. Commissioned Investigation Interim Report on Digital Assets
    2. Questions and Answers and Exchange of
  3. Adjournment

Materials

Minutes

Date

From 9:30 to 11:00 on Friday, November 8, 2022

Location

Online Meetings

Attendees

Members

  • Jiro Kokuryo (Professor, Faculty of Policy Studies, Keio University)

  • Masahiko INAMI (Special Assistant to the President of the University of Tokyo, Professor of Physical Informatics, Center for Advanced Science and Technology

  • 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)

  • Taiyō Fujii

  • Shinichiro Matsuo, Research Professor, Georgetown University

Digital Agency (Secretariat)

  • Minister Kono, Senior Vice-Minister Okushi, Parliamentary Vice-Minister Ozaki, Director General Kusunoki, Councilor Nozaki

Minutes

Deloitte Tohmatsu Consulting explained the interim report of the commissioned survey on digital assets.
In the question-and-answer session and opinion exchange, the members mainly made the following remarks.

  • Member: The first point I would like to make is that there is a good aspect that it is easy to make a procurement even if it is a small amount. At this stage, for example, we understand that the issuance of NFTs and tokens is tailored to avoid the Securities and Exchange Law and the handling of financial products as much as possible, and there is a tendency to avoid existing consumer protection laws by making it difficult to increase the amount.
    From such a perspective, it is necessary to make a flat evaluation of the roles and positioning of the Bank of Japan in comparison with existing funds procurement instruments or in light of current laws and regulations. Isn't the expression "easy funds procurement" risky? In this regard, I would like to ask if you have any ideas at the stage of investigation. In addition, I would like to ask if it is possible to consider a comparative investigation with existing funds procurement instruments.

  • Member: The second point is that although regulation is based on the Act on Transactions of Crypto-Assets, it is not necessarily a global standard, and as you pointed out, there are NFTs that do not fall under the category of crypto-assets.
    I believe that the Financial Services Agency is in charge of the current laws related to transactions of crypto-assets. If you know the basic direction of how to clarify the treatment of NFT in the future, whether it will be incorporated into the Act on Transactions of Crypto-Assets or whether it will be excluded from the Act on Transactions of Crypto-Assets, I would like to ask the relevant supervisory authorities present at the meeting.

    • Speaker: funds.
      We would like to examine and summarize the existing fund procurement methods you pointed out and the points at issue on whether it is appropriate to follow the Securities regulation Rules like digital securities such as STOs among digital assets.
    • Speaker: cryptoassets in this year's Basic Policies and other documents. Given that cryptoassets are defined as a means of payment under the Payment Services Act, we would like to present some guidelines on what types of tokens do not fall under the category of means of payment, similarly in the form of tokens using blockchain. In addition, tokens that do not fall under the category of cryptoassets may be outside the scope of application of the Payment Services Act.

  • Member: NFT and crypto assets as a whole are moving rather than growing, so it would be better to consider the expression that leads to the conclusion a little more.

  • Member: is correct, so that it will not be questioned as logic?

  • Member: Exit Image states that it will be a platform operator that will replace GAFA, but Web3.0 was not originally intended to create a platform that will replace GAFA. If Web3.0 is to change the way ecosystems, including end-to-end (E2E) and peer-to-peer (P2P) ecosystems, will be more useful to our society by combining blockchain and distributed technologies, then what will emerge from it will not be platform operators, but a certain type of ecosystem will change, a different type of responsible entity will emerge, and Japanese companies will play a leading role in the new ecosystem. Therefore, it should be considered that it will be a different expression from the rise of platform operators that will replace GAFA.
    It's a very turbulent time, and we're at a turning point in who's going to build what kind of ecosystem, who's going to share the responsibility, who's going to take the money and do it permanently, so we should be saying that we're going to be the main player.

  • Member: In addition, there are many parts that can be done regardless of tax system or regulation in the Technology development, so I would like to have human resource development related to the Technology development established separately.

  • Member: DAO, in the scene of fund procurement with some tokens, there may be cases where it is DAO and cases where it is not. As one of the utilization cases of DAO, realization of social development such as area Creation is being emphasized rather than fund procurement, so it may be better to separate the discussion. It is easier to organize the discussion on small fund procurement through tokens and DAO by dividing and summarizing them.

  • Member: sandbox system in each country. Are there any actual examples of the use of the sandbox system in the Web3.0 domain in each country? If something like a special district in Japan is used in the Web3.0 domain overseas, it would be very suggestive for Japan if included in the survey results.

  • Member: system and how users actually recognize it. The occurrence of value is a story in the cognitive domain, and unless we investigate how users recognize it and how they use it, the legal system design and the recognition of the actual situation will be separated. I feel worried that if we do not keep the separation, it will be a different story from the operational discussion. For example, is there a survey result on how users recognize the value of NFT and what it is recognized as in reality?

    • Speaker: NFTs but are not actually NFTs. Cases that are actually financial instruments but are NFTs have been arranged to a certain extent, and other cases may be examined as necessary.
      On the other hand, we would like to discuss with the Secretariat what individuals consider to be NFTs and how they are recognized.
    • Speaker: , I would like to add one point, but it is unclear what rights NFT is a Akira Omote of. NFT that is a Akira Omote of most collectible and digital arts has no legal backing, and when selling through an NFT issuer or platform, the relationship is determined by the contractual relationship between the user and the seller or platform operator according to the terms and conditions of use on the platform.
    • Speaker: collectible and various tokens have emerged, but the expression of value also includes external and non-intrinsic values that parties and market participants attribute to crypto-assets. In other words, the value is subjective and can be attributed only to the interests of the purchaser of the crypto-asset, so the holding itself is a pleasure, and the problem consciousness of how to accept such subjective value is written.

  • Member: Consumer Protection for each survey.
    Regarding the related legislation of NFT, it refers to the Act on Misleading Representation and the Gambling Act, but what users are actually facing is pyramid schemes. Shouldn't infinite chain schemes be listed?
    In Singapore, the company changed its license and showed a strong attitude toward companies regarding Play to Earn. I wonder if this study group can do something similar to that. Just by including the word "infinite chain lecture" in the research report, we can expect that companies and people who are going to do something in the future will notice it.

  • Member: Governance tokens are overwhelmingly treated as financial products in addition to the decision-making of organizations, so shouldn't the expression be worked out from the viewpoint of consumer protection?

  • Member: NFT, it is desirable to state in a public document that they are not copyrights themselves, but it is more desirable to state that they are the terms and conditions of use of exchanges such as OpenSea.

    • Speaker: , in particular, pyramid schemes, in the field of consumer protection and law enforcement, we will conduct a case study of fraud and negative cases, sort out what kind of problems there are, and report them. It is our understanding that we will issue it at the earliest possible timing, and we would like to take up the points you pointed out well after consulting with the secretariat on the details. We will discuss the terms and conditions of use of marketplaces such as OpeaSea with the secretariat on the details, but we agree with the points you pointed out.

  • Member: From the perspective of security, the cooperation between My Number Card and DID is described as an environment that can be used with peace of mind, but I would like to ask if the awareness of problems such as the outflow of NFT by unauthorized access is described.
    The prevention of fraud is a recognition that can only be dealt with through information sharing with relevant organizations and parties. I believe that information sharing is necessary even in law enforcement cooperation. Please indicate the importance of information sharing as a measure against fraud.

  • Member: Regarding the copyright relationship, there was a comment that even if the right does not clearly generate a copyright and is not specified in the legislation, it will be stipulated in the Terms of Use. I would like to ask about the legal nature of the agreement if the right is a claim.

    • Speaker: , I would like to discuss in order to report the points of the system for taking up and preventing negative cases such as hacking by exploiting weaknesses and leakage of assets due to leakage of secret keys as examples in consumer protection and law enforcement.
    • Speaker: Although it varies depending on the NFT, it is basically a right of claim. For example, there is no clear description in the terms of use of cases in which game characters and items are linked to NFT, but regardless of the presence or absence of NFT specifications, as with game items and characters of social net games, it is common for users to obtain contractual rights such as contractual positions that allow them to exclusively use game characters linked to NFT and exclusive use rights of claims in relation to game platform operators.

  • Member: security from a different perspective from consumer protection?
    Consumer protection is considered to be a problem that occurs when business operators act dishonestly with consumers and consumers are tricked into signing contracts. security is considered to be a problem that the reliability of the Web3.0 world is damaged by an event that attacks the system itself. Since the two situations seem to be different, we would like you to consider how to organize them.

  • Member: There is no 100% answer regarding the security of blockchains and applied systems, and it is the result of research and engineering of security for about 20 years to consider them as management systems in order to identify the risks assumed fundamentally, not only in Web3.0, and to take acceptable measures against the risks. The main idea of the framework remains the same, but it seems that efforts are underway on how to apply it in the new architecture of Web3.0.

  • Member: - Management System as a general framework of security and what will be added and strengthened in the Web3.0 era in response to it, and to include in the report that we must continue to examine it as a future direction or that we need human resources to examine it?

  • Member: crypto assets and the eyes of investors, but I think DAO is a little different. In particular, there is talk of AML and KYC, but the law is about to change in the U.S. There are differences in the state of beneficial ownership and various movements of beneficial ownership. At present, the U.S. is lax because the bill has been submitted and has not yet been passed, but it is desirable to catch up with international trends.

  • Member: NFT Illegal moves are common in the art industry. If you look at things like Art Basil, it is a way for collectors to put their art on show and sell it. The regulation of securities and the idea of consumer protection collide with normal movements in the art industry in NFT. If you look at everything as securities and crypto assets, there are cases where the gnomes of the community collide, so it is better to put the perspectives of art collectors in the context of NFT. What is interesting about Kuri, who is involved in the world of NFT art, is that the art industry moves like securities, but the business model of art is to sell it when it becomes noisy and the price increases after it is purchased. Illegal moves are common in the art industry. If you look at things like Art Basil, it is a way for collectors to put their art on show and sell it. The regulation of securities and the idea of consumer protection collide with normal movements in the art industry in NFT. If you look at everything as securities and crypto assets, there are cases where the gnomes of the community collide, so it is better to put the perspectives of art collectors in the context of NFT. It is better to hear from Christie's and Sotheby's, who are involved in the world of NFT art.

  • Member: Web3.0. Digital assets, distributed identities, smart contracts, and DAOs seem to be Web3.0, but distributed ledger technology seems to be a story with a different level. NFT + crypto assets = digital assets, and the whole combination of digital assets, distributed identities, and smart contracts is Web3.0. I am going to write a report, but the important point here is how to organize and think about measures for each part so that the policy will function beyond contradictions, cultural differences, and differences in the division of public office. I would like to ask you about taxonomy and map.

    • Speaker: distributed ledger technology, and the distributed Internet called Web3.0 is emerging in this utilization field. As a promising use cases of distributed ledger technology, digital assets, distributed identities, and smart contracts / DAOs may be used as important elements of Web3.0 in the future. We recognize that this is a situation in which we have been conducting research from the viewpoint of problem awareness.
    • Speaker: The definition of digital assets includes not only crypto-assets but also NFTs and governance tokens whose legal nature is not clear at the present time. Crypto-assets are crypto-assets, but digital assets are a bit broader in concept, and the Financial Action Task Force has issued guidance on digital assets that are subject to anti-money laundering measures. Basically, in line with this, we are considering the outline of where policy measures will be necessary in the future, not limited to crypto-assets.
    • Speaker: Web3.0, it is not limited to digital assets, DIDs, and smart contracts. In the NFT White Paper issued by the Liberal Democratic Party, the proposal of a broad concept to be addressed by the government is not clearly under the jurisdiction, and there is a background that Digital Agency is focusing on the parts that need to be understood as a control tower and tailoring it as a research study. Digital Agency is focusing on the points that need to be researched and considered in the content of Web3.0.

  • Member: Since the birth of Bitcoin, various people seem to be making efforts in this direction. However, as an opinion of the opposition, there is an opinion that it is only reinventing a stock company at high speed after all. It is said that an STO is fine, but unlike an STO, what kind of examples of ways to prevent bad things from happening using blockchain should be considered.
    I would like to know if there are any examples, but if there are none, I think it is necessary to discuss again the content and results of the challenges to date and the bottleneck points for the FSA's regulation Targets, and I would like to ask what the path is.

    • Speaker: IPO/STO seems to be partly due to the avoidance of existing securities regulation. On the other hand, it seems to be a fund procurement targeting functions that cannot be found in conventional financial products, such as a function that must be a token and a world view that can provide an incentive for both service users and developers to increase the value of their tokens.
    • Speaker: Fund procurement, I think it is in consideration of not only marketing and acquisition of users, but also realization of big purposes when expanding businesses based on the fund procurement, such as community creation. I think it would be good if we could extract points to be eliminated so that the avoidance of the existing securities procurement is not focused too much, while putting that as a banner after sorting out the ideal image of what we want to realize first with the fund regulation using tokens.

  • Member: Research Report will not be disclosed externally as it is, and if the words and phrases can be revised, it will not cause misunderstanding.
    In the first place, a small amount of funds procurement has been used for the development of an infinite number of financial products. The use of tokens for a small amount of funds procurement is a special case, and it is desirable not to include a misleading phrase that tokens can be used for all.

  • Member: In addition, given that fraudulent cases have already occurred, we should also suggest a cautious stance. We should avoid using positive words in a way that causes misunderstanding, and we would like to ask that the suggestion that they can be used positively for small funds procurement be revised before being announced.

  • Member: There is a side to prevent the negative side of small fund procurement, but what are the advantages of doing it with tokens? In addition to IPO/STO, crowdfunding is a small fund procurement, and it may be comprehensive to describe how to cover the negative side based on the advantages of fund procurement through tokens by comparing them side by side.

  • Member: From the description of NFT and digital tokens as digital assets whose nature is not well understood, it is mentioned that NFT will be legally disposed of in the end, but will governance tokens be disposed of separately in the DAO report? I understand that in order to make DAO work well, it is difficult to manage the community, how to make the voting function, or how to give incentives to token holders to make commitments, so I would like to confirm it.

    • Speaker: governance tokens, it is recognized that most of them fall under the category of crypto-assets in Japan. Many of them have substantial functions that can be used as a means of settlement. As for the case of Nouns DAO, it is a governance token and NFT, and the legal definition of NFT is ambiguous in the sense that there is no legal definition of NFT. Governance tokens are mentioned in the survey on digital assets.
    • Speaker: On the other hand, in order to organize the various activities such as voting and the key points in the operation of the DAO while taking into account the extraction of good examples of how to use the DAO, the second point will be dealt with in the DAO.

The secretariat explained that the next workshop will be held on Friday, November 18.
The secretariat explained that the minutes of the meeting will be published after the members confirm the content.