May 7, 2019
Financial Services Agency
Financial Services Agency of Japan (JFSA)
held the Blockchain Round-Table (BCRT)
on March 27 and 28 with the participation of foreign and Japanese regulatory and supervisory authorities and central banks, including the;
Financial Stability Board (FSB),
International Monetary Fund-Regional Office for Asia and the Pacific (IMF-OAP),
Organisation for Economic Co-operation and Development (OECD) [remote],
Financial Services Regulatory Authority of Abu Dhabi Global Market (FSRA),
Australian Securities and Investments Commission (ASIC),
Bundesanstalt für Finanzdienstleistungsaufsicht (Bafin),
Banque de France,
France Autorité de Contrôle Prudentiel et de Résolution (ACPR),
Department of Finance - Government of Ireland,
Dubai Financial Service Authority (DFSA),
Hong Kong Monetary Authority (HKMA),
Monetary Authority of Singapore (MAS),
UK Financial Conduct Authority (FCA),
Bank of Japan (BOJ)
Ministry of Finance (MOF) Japan
as well as academic institutions, including the;
MIT Media Lab,
University of Cambridge,
The University of Tokyo
. Also, foreign and Japanese industrial experts specialized in security and cryptography and engineers of blockchain were invited to join the BCRT. This year, Japan holds the G20 Presidency. The G20 Finance Ministers and Central Bank Governors Meeting will discuss technological innovation in the financial sector as one of important agenda under our Presidency. In addition to addressing the risks of crypto-assets, we believe it is of importance that decentralized technology, such as blockchain, that is underpinning technology for crypto-assets, will be deployed with an environment where the benefits can be attained. In order to harness the opportunities of innovation in the financial sector, global cooperation not only among regulators but with various stakeholders including technological community will gain more importance. BCRT is a part of this effort and JFSA has hosted it annually since 2017 in the name of Multilateral Joint Research Project.
Highlights from the discussion
Date and Venue
Participants discussed the effective cooperation in order to enjoy benefits while mitigating risks brought by decentralized financial system using blockchain, among various stakeholders including regulators, engineering community, businesses, users/investors and academia.
Participants discussed how we could design the appropriate approaches that regulators adapt under the fast-paced technological development. In the situation, it was spelled out that the underlying dilemma which regulators hold between procrastination principle and issue of technical debt may arise when regulatory stance is being designed.
In order to employ the potential benefit of blockchain while addressing risks associated with it, it is of importance that all stakeholders in the ecosystem need to share values what social benefit they should serve. In so doing, relevant stakeholders would be better to deepen understanding each other and facilitate cooperation by aiming to have a common language and establish a venue to communicate among multi-stakeholders.
In light of the emerging risks that blockchain could give rise to under decentralized financial system, participants discussed privacy and traceability issues of financial transactions over public blockchain. In general, blockchain engineering community is making effort to develop anonymization technologies while public sector authorities may need to have more visibility into financial activities using blockchain.
Especially, it was spelled out that privacy enhancing technologies may leave people vulnerable to financial crimes such as money laundering, while these technologies are developed and motivated with good intentions such as increasing fungibility and scalability.
On the other hand, engineering could provide technical solutions to concerns regulators may have; however, in so doing, engineering efforts and regulators concern are mutually and properly observed.
Participants indicated that financial regulators may have to consider requiring regulated financial institutions only to use blockchains that are auditable.
In the area of ongoing technological developments, current initiatives were shared by the engineering communities. Especially, various latest technological developments associated with scalability, security, secrecy and fungibility of public blockchain (eg bitcoin) were addressed.
Participants also discussed recent developments around blockchain ecosystem such as regulatory updates/comparison among various jurisdictions as well as potential and physical cases of blockchain application including token economy, trade finance, central bank digital currency (CBDC) and inter-crypto assets exchanges trade market that highlight the benefits and underlying challenges.
March 27-28, 2019
Financial Services Agency of Japan, Tokyo
International discussions toward G20 Japan Presidency
Multi-stakeholder governance for the blockchain based financial ecosystem
Privacy and Traceability of the financial transactions on the blockchain
Recent development of the token economy
Jurisdictional initiatives on blockchain
Regulatory landscape and current efforts
Blockchain based financial services ー potential applications
Multi-stakeholder simulation -Freedom or control? -
The meeting was not open to the public but experts were invited to this round table to learn and share their technical views on blockchain.
The round table discussion is still a voluntary initiative where experts gather from regulatory authorities, industry, and academia, and it is appropriate that candid discussions be ensured in a closed space.
However, some common viewpoints and challenges from the meeting may be shared to the public once their publication is agreed upon by all participants.
 'Procrastination principle' generally means that any problems that the new technology confronts would be solved by others in the future. Regulators that is taking this principle into consideration would avoid regulate new technology too early.
 'Technical debt' generally means that once technology developed and widely used, it would become difficult to change the underlying technology. Regulators that is taking this issue into consideration would try to regulate new technology as early as possible.
Fintech and Innovation Office, Financial Services Agency