Bridging the Gap: How to Effectively talk to Regulators? | Devcon SEA

[Music] can you give him the mic hi everyone thank you very much for joining this Workshop today my name is Marina and I'm coming from the European crypto initiative which is an advocacy group based in Brussels in Europe uh we are going to talk today about regulation and we have first a panel um we have a very special guest uh we're going to introduce later uh but today we are also going to do a workshop after that uh and basically the first part is going to be a panel after the panel we're going to sit in groups this is why we have tables here and we are going to discuss different topics uh some can be dii me staking wallets privacy see whatever you're interested in so you're going to join each group and uh each table and we're going to have moderators helping you with the discussion so this is the plan for today I wanted to give uh two minutes to speak also to Florian but I think after that after short intro we're going to go quite straight into the panel we're very eager to hear what Regulators have to say about crypto regulation thank you Marina I'm just as excited as you about this workshop and the panel and uh welcome everybody excited you're here thank you very much [Music] so thank you I would like us to join all together our speaker um we are very privileged to have I don't know if you can change the slides as well thank you very much so we're very privileged to have a regulator here with us coming at Devcon for the first time so I hope you like the conference uh from the Japanese FSA uh and it's Ishida ruk uh very very much thank you for joining us and uh I think it's an amazing it's an amazing um in way speaker as well just because of all your experience uh you have encrypt so uh you had a lot of um yeah a little bit unusual story uh about uh about how you came into crypto and how you started learning about it as well but um I wanted to maybe start with this uh apparently you have studied uh computer science as well you were very interested in crypto you have even been um running notes Etc so maybe give us a little bit of introduction on this side as well sure so thank you Marina and then good afternoon everyone so thank you for having Regulators like me for this U developers conference obviously I'm a minority among all of you but uh um so Japan FSA is a regulat like you us or Bank of Thailand or ukfc and then we regulate basically everything like Banks uh insurance company as well as crypto service providers and then what I am doing is um uh to encourage and Innovation uh with emerging technology such as blockchain and AI so as a chief inch officer um one of our important mission is to bring an international expert like you to come into Japanese Market because we are more competition among local players and we want to make Japan as a one of the as a Global Hub of crypto and the blockchain industry then personally I spent uh two years as a blockchain researcher at Georgetown University in Washington DC so I started my career as a Regulators back in 2010 and then since then I have been doing not boring but you know traditional Financial Regulators job but suddenly my boss asked me to do something about blockchain and I had no idea at that time what what is blockchain why why they have to go there but uh somehow I decided to go there and it was fascinating because I had a lot of opportunities to discuss uh Bitcoin developers eum developers who have totally different mindset from Regulators so you know basically they it's a it's like you know six or seven years ago basically you know they hate government they hate Regulators in many cases so when I say you know I'm from regulator so I don't talk to you anyway so this kind of things it's a very kind of unique opportunities for me to learn um how we can communicate with um engine and other business people coming from you know crypto industry then you know I spent a lot of time to learn about internet governance and the blockchain governance and then we realize you know we should develop kind of mutual understanding between regulators and the developers and the business Community to make a blockchain really uh to have a really you know to make our society better with this um Innovative technology I'm happy to talk and anything today thank you very much thank you so much this is a very fascinating story uh my next next question would go more into how Japan is regulating crypto assets you were um one of the first to actually react to crypto to the crypto industry to exchanges because you had this specific event that happened with one go in 2014 already so uh after that you have also been pretty I would say famous for um some kind of protecting your users from other exchanges collaps that happened recently as well so um what is the whole story of the Japanese FSA and how the regulation came into place from the beginning until now maybe I think it's a little bit more focused on exchanges but that's the interesting thing for us so um 10 years 10 years ago um more than 80% of bit transactions was taking place in an exchange in Tokyo named the mount go which is run by a french guy and then Regulators didn't know that at that time but uh suddenly uh 500 million us equivalent Bitcoin but disappeared and then not only Japanese investor but also International investors lost their Bitcoin and still you know court process is ongoing to get their fund back so we realize that the it's a huge industry and it probably growing very much in the future so we decided to make a regulation for crypto asset service providers so um that's why Japan is one of the very first country to implement crypto regulation back in 2017 so basically we require crypto exchange and to do kind of kyc or some you know uh customer protection requirement then even after that we had another series of incident if you may know coin Che is one of the large largest Japanese exchange and then again nearly 500 million US dollars of name B name was hacked and then even after we have a regulation so we are kind of freaked out so we have to title regulation that's why we introduced socaled a code wallet requirement it's a requirement asking exchange to reserve more than 90% of customer asset into offline environment so that's that's something you know industry didn't like at all because you know they need a liquidity management so it doesn't make sense from business perspective to put most of their crypto asset into code wallet but uh actually that regulation worked when FTX uh incident happened because um FTX Japan segregated their customers asset into within Japan that's why unlike many other countries investor Japanese investor got their fund back much earlier than other countries investors so that's that's something uh we made it but uh I don't think you know I believe we have to change update our regulation according to the development of technology so these days we have a you know MPC b or some other technologies that makes um custody safe if even the hot environment so it's technology is changing that's why I'm here to learn what's going on this industry and then we try to keep update to develop a policy that makes sense both industry and the ordinary people and The Regulators that's a very interesting story because from the European side we have started in 2017 but we still have not yet you know a regulation that is applicable at this moment so it took us quite a long time and you had regulated exchanges already in 2017 so that was a much more efficient I would say a governance from from a regulatory point of view um I think the consumer protection is really something that you achieved and that was really efficient from you know the whole story that happened with exchanges and the very interesting thing also the approach and a called storage um and basically in way segregation of funds and being really careful with what and where the funds of the of the customers are um right now you're thinking about maybe updating like you mentioned and learning more about the Technologies but what do you think in general is the best approach for Consumer Protection like what is really important what is really efficient to make sure that the consumers are not losing funds and that they are safe which is in a way some of the most important uh goals of of a regulator so I think what matters is bance so and in general Innovation should come from open source Community like the internet and the Bitcoin and then if we introduce strong regulation from day day day one maybe it could cyle Innovation so now we have a regulated World such as centralized crypto exchange and then not very much regulated world like you know Bitcoin Network or some defi protocols and then we have to be careful about you know what uh we should do to have a balanced uh growth so from consumer consumer uh protection perspectives so anyone can have easy access to centralized exchange that's why we put a um kind of in a tough regulation on them because they know it's a on lamp off ramp and it's a ordinary people will have to change their fat currency into crypto that's why exchange is heavily regulated and then when it comes to you know the lending and whatever B it's a kind of market for crypto enthusias so it's like you know probably they know their risks and they know what they're doing so it's a kind of you know place that they should take their responsibilities but uh on the other hand when we think think about you know anti you know money laundering or terrorist financing so these days are North Korean and haer are kind of attacking Bridge protocol and then D5 protocol and they are sing tons of crypto asset so that's that's something you know we cannot tolerate because you know cumer it's okay because you know they got a compensation but if the crypto but transfer to North Korea you know basically we we can do anything to prevent that so that's consumer protection in one thing but um money laundering terorist financing and financial stability it's another negatory goal so we have to think both of them actually Financial stability is an interesting one because it was followed and it was important for many regulators and somehow they usually connected to the regulation around stable coins as well so I would assume that as you mentioned that that's also something that it's kind of important for you as well indeed so stable coin is very promising so that could be a bridge between try and then Defi and indeed so many Japanese uh financial institutions and the Enterprise are looking at stable coin to make something happen so that's why we have introduced stable coin regulation June last year and we are now discussing both local and then International potential issues of State stable coin potentially denominated in JPY so um you right so that could have a financial stability implications so basically it's like you know banking uh deposit but it's good for crossb transfer and then some you know payment and some investment so that's has how much flexibility and then that could be good for financial stability in a sense because you know we have more resilient and then um kind of faster payment system but at the same time we have to think about where that Reserve asset are protected and then where how that internal control and then governance are put in place for both issues and the intermediaries so that's and something you know we' like to have a more engagement with uh industry player so we have a centralized stable coin why you know decentralized or algorithmic stable coin so there a VAR types of stable coin and the different governance mechanism so there's no one side fit so solution so we have to think about each of them individually since we started with centralized and decentralized stable coins I would go to the next question which is you know non- centralized entities like non non- centralized exchanges which are usually called decentralized exchanges or any type of defi projects Dows Etc we have seen that iosco for example the international organization of Securities um agencies has also written a report on defi they have written some suggestions to how to regulate defi they were in a way talking about the risks and how to limit this those risks what are you thinking about those you know no very in a ways centralized entities and of of course it's a whole Spectrum you can be you know in a different I would say level of of decentralization but it is an important topic and it seems that it has been important enough that International organizations have been talking about it and even you know writing paper and doing research on that um so I was in um Malaysia po two weeks ago to join icope meeting among regulators and then the topic is Defi and the crypto assets so um many Regulators including the US and the marriage and Security Commission are there to discuss how we could potentially mitigate the risks that are defy could bring so um basically know there is so defi is very different um by project so and sometimes you know defi is just in name only and then it's a kind of marketing world so we can actually identify someone who are who have a sign signicant in significant influence over that arrangement in that case um you know they could potentially update their protocol change parameter or you know and get some fees out of that Arrangement so in that case uh we might have you know we could potentially identify someone as a regulated entity and apply know similar regulatory requirements that we are applying for centralized exchange but uh having said that it is difficult to ID identify who is actually playing the game so probably we know you know Twitter name on the but uh we don't know where they live and what the actual real name of those and developers so that's quite difficult but uh still you know there are some entity like Foundation or lab and then some you know Community or legal entity so that could be a kind of contact point for us so what but it's kind of encouraging encouraging for us is you know some D5 Community are willing to work with us so I'm coaching Financial action task force crypto asset working group so it's about you know kyc traval R and then some others and I think I believe you know some of you don't like mlfc regulation but uh we invited a lot of D5 players and they have a good discussion over a couple of years so um we we're working closely with industry to come up with good solution that works both of us for for the future I think the industry has been more and more mindful of the defy in name only as well and we're trying to understand internally also what are the standards what decentralization actually mean and I think it's also more and more um in a way possible and important that we really strive for decentralization within the industry as well so hopefully we can I would say also from from industry perspective give a little bit more as a kind of a feedback or summary to what the industry really thinks those elements are and and how to really Define that um on the other topic you mentioned you are part of the um fif as well organization so those organizations I think are trying to kind of find a global approach to crypto when it comes to different topics how um how do you think this approach is in a way playing are we really going to be able to have a global regulation or at least regulation that is compatible to each other and you know certain standards that would allow the projects the technology to be Global and to basically in a way also um approach and work in different jurisdictions so um International Organization like fat ioso FSB are trying to set a kind of minimum standard uh globally uh for to ensure kind of Level Playing Fields and then F it's taking care of ml safety part and then we have a standard recommendation 15 which is all about you know how ml Shifty control should be in place for crypto service players and then the problem we are facing is that there are many country are still not implementing that recommendation because it's to be honest it's a very difficult so it's you know some country like you know some small small small countries in Asian Pacific region you know they are strug struggling to have a enough human resources and then take capabilities to develop their regulatory framework and then it's not only about creating regulation but you know they have to do enforcement or supervision like every day but you know it's quite technically challenging and then probably they have to use know blockchain analytics tools and some others but uh I think they need more education that's why uh F of it's um focusing on how we can provide a technical assistance for those uh struggling with um um implementing recommendation so we will have a seminar or and the potent sometimes we will invite a private sector players like you know exchangers or blockchain analytics to provide us to share their you know kind of risk assessment and then to share how to use their tools for example so that's a ongoing challenges but we hopefully we have a good regulation all over the world many learning was on both sides for sure um so another topic that has been recently discussed and I would say mostly in the last few months is the adoption of crypto and let's say in general the technology by the institutional um players and also for example tokenization that is something that might be interesting again more for traditional Finance point of view and traditional Industries um how do you see this potential is it are those activities needing regulation uh you know to actually be flourishing so yeah personally I believe in the potential of tokenization because you know um it's like you know uh dream but you know if um assets and the liabilities on Bank bance seet are all tokenized it's maybe easy for Regulators to monitor the transaction because you know currently we kind of Trust Banks you know we have a Authority and to ask Banks to submit us some data to regulate that and then we will analyze that but ultimately it's a trust is needed so sometimes you know they are they might give us you know fake data and sometimes you know fro disclosure incident happen all over the world so something it's what is great about blockchain is transparency and auditability so and that makes Not only industry job but regulator job much easier and much um efficient in the future so that could be a future but uh of course there are potential risks like you know we can toiz a liquid asset like our real estate but uh Tok itself is very liquid potentially but underlying asset is still liquid so we have to think about a mismatch of liquidity and the maturity that's one thing and then we also have to take care of you know smart contract uh vulnerability for example it's a kind of different types of operational risks so I think there are both opportunities and then risks and the oranization are not taking off that much from my perspectiv partly because of you know we are using a different blockchain and there is no interoperability that's why we don't have a good secondary market and then another thing is um another thing is that you know we don't have programmable payment layer so we can tokenize Financial instrument like you know corporate bond real estate but we need a digital money such as stable coin tokiz deposit or potentially wholesale cbdc but that they are still not ready very much so it's I think it's a long-term project but hopefully we will have a a lot of tokenization project in the future we we mentioned iosa and other International organizations few times and we know also that iosa was looking into any type of initiatives that would share more about and educate more about crypto uh mostly thinking about consumer protection can we do more as an industry that is a question for us of course can we share more can we can we educate more anyone that is for example using our products or the general Community but I know that um different Financial authorities they were also thinking about can we you know do something can we educate the the community and our users what uh what is your opinion on this absolutely so and then Regulators need education as well because you know basically you know it's quite difficult for us to understand the the technology itself and then it's kind of regulatory implication so um we need that kind of input from industry expert like you as about you know how we can achieve our goals so we are Tech neutral we are agnostic to Technologies applied to the financial system so we don't care it's blockchain II whatever what matters is to protect customer than then to prevent Financial crime than to ensure Financial stabilities so we current regulatory framework has something like you know disclosure requirement or kyc or travel but it's a it's just a mean not a goal so our goal is protecting customers so if Technologies could achieve same gos with slightly different approach potentially you know we can welcome that you know instead of traditional kyc we could potentially use I don't know did VC or uh privacy enhancing technology NPC whatever so but that it's not something you know Regulators can come up with so we need need a kind of counter proposal from industry so if you don't like current regulation you know we are very welcome and we appreciate and the kind of alternative approach that the industry could come up with actually we've been discussing a lot about this uh at the side events before Devcon and I think there's going to be a lot of discussion about that during Devcon as well so it is true it's also on us to try to propose certain Solutions and to try to use this technology in a way that would be at least for this community it's very important privacy preserving as well if there are options for that and of course this is why we're working on this Tech so that's very useful thank you and the last question before we start with the open question for the audience I hope you have some uh you are you mentioned a few times that you want to learn from the community that a dialogue is very important so I know that there's been different organizations that you've been talking to and also some kind of a self-regulatory ideas and organizations as well but um how again how important how how in a way open um I would say different authorities are or or should be in order to you know do the the kind of um again to protect the users to the maximum uh amount possible but also how can we be useful uh as an industry when we are talking to Regulators when we having this uh great opportunities to discuss with you uh also in person sure so so in many case uh Regulators are not enemy uh to Industry otherwise you know we are willing to be a part of and the community to make our society better with blockchain technology so um actually we welcome any kind of dialogue uh with industry so I want to just say you know please um contact us and then you know have a discussion and then that is very important because you know when we look back look back the Internet history there used to be a telecom Regulators regulating Telecom industry but uh currently no one is regulating internet itself they regulate you know IP or some others but uh kind of they changed the way of regulating industry and it works so it's kind of no miracle that we have that's why uh now we can use internet so otherwise you know we are kind of socially died during the pandemic so we should appreciate internet innovators and then regulators and then hopefully you know blockchain could be something like the internet in the future in order to do so we have we need a more kind of multistakeholder discussion like we have today so that yeah just yeah have a good disc discussion thank you again very much for your time uh and also for your willingness to take questions from the audience so now is your time time do you have any question on the topics of Regulation I would say specifically to of course the Japanese uh Market in jurisdiction but maybe also globally since we've discussed the the regulation coming from International organizations as well any questions yeah hi thank you for your time um what would be something you would like to see um in Europe uh in terms of the regulation um yeah uh thanks so um they Implement they will Implement MAA and they already approved some stable coin and some crypto asset service providers and then actually we are we have a discussion C quite frequently because you know we need a kind of harmonization among regulation so um you know I cannot specifically comment on other countryes policy but you know basically European regulation and our regulation are quite aligned so um and then what we will do more in the future is you know Bally blockchain is uh Global by nature and then some stable coin issue then Europe could come to Japanese market and the vice versa and then maybe it's good for industry players to have a kind of similar regulation because you know that you have to comply with different types of Regulation so that's something we can do more and then now you know after the election maybe yes Regulators will have some s and then many Asian Regulators are taking different approach but I specifically to Europe you know they are quite Advanced and then they have a they will have a global player regulated under the MAA and then they have a good you know privacy protection regulation so that's something we can talk more and then we hope our leg it's not kind of too much honorous to the players like you thanks Alam for the context I would like to know about the adoption rate in Japan because it's super clear how is the regulation but I think that also is super important to understand how is the adoption in the countries uh thank you so I don't remember exact number but uh there is a millions of um account are already there so basically we have a 30 registered Exchange in Japan and I don't know why but Japanese uh retail investor very much like crypto trading that's why we had a mon 10 years ago but still a retail investor like crypto so if you are doing some kind of retail business I think there are business opportunities and then when it comes to um large investor like institutional players basically they are very conc conservative unlike um some other countries um Family office hedge fund but finally they are looking at um blockchain industry crypto industry so they are interested in investing in some crypto asset or using blockchain to to have a real use case so in case I think Japanese Market is um growing these days any other questions okay um since you said Regulators do actually appreciate the transparency of uh cryptocurrency what's your take on the rise of uh zero knowledge proof technology and the potential implication of anonymous transactions yeah it's a good question it's a kind of uh W sword so you know for example if we think about you know inter Bank transaction they should be private otherwise it's a it's very bad from Financial stability perspective so even Regulators want some privacy for specific use cases but uh you know um if we think about you know something like uh privacy andh hasing Technologies for anonymous transaction uh that could be um very problematic especially for ML safy perspectives so that's why some Regulators are taking enforcement action for the some you know mix and some others so it's a it try to be te neutral but you know if speciic protocol B used by instuctors maybe we have to take some actions so um it's use case and it's intention of the project and then it's not you know yes and or no question so we will have a discussion and what in this protocol for and who are actually using that so we will should we should do an evidencebased policy making and regulation any other questions do you think do you think uh amlc uh CTF regulations are excessive when it comes to crypto at least in some use cases question is regulation is excessive yes I'm in charge of MF regulation so I I shouldn't say yes but [Laughter] uh so rather you know as I mentioned you know we are now applying you know conventional way of ml safety to crypto industry but you know technology is different so maybe I don't know but the op optimal way of doing AML AML shiy could be different so rather than just you know taking photo I know sharing passport or whatever we could do something more like using nft or B BCD type solution could be efficient so that's why we are now kind of doing some you know Po in with industry to to kind of you know consider how we can potentially update our way of doing so that's I think that's a long-term goals but what is fascinating about blockchain that you know some supervisory function regulation could be embeded in smart contract itself so currently know regulator that doing regulation by human but you know we will see a kind of machine to machine transaction in the future very much so it's probably impossible for Regulators to do the same thing in 10 years in the crypto asset industry so we have to change and then we are welcome about you know Innovative solution we had one more um hi so um yeah you see more traditional companies exchanges uh making their own layer TOS on ethereum so base for example from coinbase but also in Japan uh Sony with sonum so in what way do you look to them to regulate so it's sort of like a hybrid permission kind of thing so yeah it's a great great question so many Japanese and Enterprise like Sony are developing their own blockchain so um we will see so many layer one lay Layer Two solution private public same public and then I'm kind of observing you know Global layer layer one project if you may know it's a kind of unified Ledger and then kind of bar dat is Big regulated Banks and the financial institution can do can organized and some asset and then cbdc could be issued so we will see a very different types of blockchain and then a lot of defi project and organization project are now taking place and then what matters for us is probably um not about technology itself but more like you know how we can achieve our goals so we don't care it's a public or private but what matters is like know consumer protection as we discussed so if it's a permission blockchain you know we cannot identify the kind of bar data and the manager of that blockchain but uh it's okay if still customer is protected in the financial clme is prevented so it's more like you know use case and economic implication rather than underlying technology itself hi um so I think we've seen over the years how kind of technology has advanced such a much faster Pace than than regulation and regulation is now starting to catch up um but in many cases the regulation is very much rules-based and there's a risk that that regulation soon becomes you know inadequate for future activities as well and that's why we're already seeing you know Regulators looking at different activities within the ecosystem around you know staking and defi related activities everything else H how feasible is it from a regulator's perspective such as the you know the Japanese f a or european authorities in the context of MAA in drawing up more principle based regulation as opposed to specific rule-based legislation which risks you know becoming outdated and not being able to cater for you know the broad spectrum of activities that are that are being carried out within the space yeah that's a great question so you're right so it's probably impossible to describe everything in our regulation about what you can do and you cannot do so uh we try to take you know principle based or risk based approach for this space so um what we are asking um to Industry to identify risks and then to think about potential risk mitigation measures and then we will monitor that and if we think it it's insufficient you know we will ask you to improve the operation so that's a basic concept but having said that you know we kind of still have a checklist uh for compliance because you know some industry players want that kind of checklist so it's a balance between kind of prescriptive regulation and the principal based approach and then in Japan we have a self regulatory organization and then they have their self- regulation so there is are more details and it could be changed easily compared to law and ordinance so and we are kind of 2ti approach we have low and then more detailed guideline published by FSA and then self regulation developed by an SRO so I hope that works uh for now but uh what what is not only regulation and then but uh supervisory judgment so you know if we sometimes you know it's a kind of judgment by Regulators what it's good and what is not so everything is not written in that regulation itself so that's why we need a discussion with the industry so I hope that kind of communication could work hi you talked a little bit about coordination with the European and potential future us Securities Regulators but I also know you know in the area I work in which is tax there's what I see is is a lack of coordination between the Securities regulators and the tax Regulators there's a regulation or a guidance Global guidance called carf that requires any value transfer on any decentralized network to be kyc um so even if you were to accept decentralized identities maybe zero knowledge proofs on top of those it it still we have another regime that requires identity to be disclosed so it kind of defeats the purpose can you talk a little bit about the Dynamics maybe within the country between the different regulators and maybe there's others that I don't know about there's tax there's Securities maybe there's others who have a stake in this as well yeah that's a I think great point so we are not tax Authority so there's a different Ministry taking care of tax and then so you mentioned about carf uh it's a oecd initiative and then what is rcky for us is you know Financial action task force are also located in O OCD building in Paris so we also invite a car representatives to our meeting and then to share their on development so what we have in common is you know the need to trace crypto transactions so both you know Financial regulators and the enforcement officers and tax authorities needed to trace and that blockchain and the crypto it so that's something you know we can share but we also have slightly different kind of objectives as Ministry so yeah it's a kind of a little bit tricky discussion but as what it at least needed is to share information and then to uh work together both locally and internationally and then I think you know the place like you know oecd is a very good place for the multistakeholder discussion and then we have some startups to help um people to pay tax uh appropriately but uh it's still challenging so I guess you know not many crypto transaction are you know tressed enough by tax Authority so that could be a potential and challenge for the future so yeah I don't have um very good answer to your question but what matters is further coordination I think there was another question hello uh so I also had a further question on coordination so there's one coordination from the perspective of uh like uniformity of some Fair level of regulations uh a lot of people want that um but you also mentioned something around some countries might not have enough resources to implement that so due to lack of resources you might find like a country like Kenya or Nigeria might have the same regulations as the European Union but the licensing process takes close to 18 months for an exchange to obtain that license what is your perspective because I'm working on drafting some regulations in a bunch of African countries and I wanted to get your perspective on something called a fast track licensing approach that if somebody is licensed in Micah uh all they need is just to pay the licensing fees cuz that is what the government cares about and the fact that they're licensed in a well resourced uh jurisdiction that has done enough due diligence on them that is sort of a standard that just allows them to get the license within a week so if you're licensed in Europe and you want to scale in Africa you just present your European license pay the licensing Fe to the country and you have a licensing you have a license within 24 hours yeah so uh Regulation and Licensing and supervision are very very different so potentially you know any country could have a similar regulation to that of Europe or some other countries but uh you know it's about you know document but licensing and supervision is more like you know practices so you know uh Regulators uh have to understand their business model and then the contents of application and what is the risks so that kind of things are kind of not easily achievable uh by an eming countries Regulators so that's why as I mentioned we try to give uh an assistance to um those regulators and then so we of organize you know online uh webinar for emerging countries regulator to share uh how you could potentially Implement travel for example and how to accept application something like this so I hope that works uh in the future but uh you know some country like you know small African and Asian country decided to prohibit crypto asset trading but it because it's easy seeming seemingly but maybe it's not enough just to ban crypto because you know they have to make sure that uh crypto trading is um actually not taking place in that country so um you know our standard doesn't say you know every country should have same regulation but we set kind of minimum standard and then there some discretion by countries to develop you know additional requirement or you know to B crypto transactions so um it's not easy very actually so even Japan we will we took some time to develop supervisory practices so um but you know they have to start now otherwise you know some bad Act exporting and such kind of weak regulations so yeah I have no specific answer but you know yeah we have to work together so I would say we conclude with a question um you were very generous with your time we spoke almost for an hour so thank you so much for taking all the questions my P thank you very [Applause] much so this is this concludes the the first part of our Workshop we have more stuff for you if you want to stay and we very much welcome you to stay we wanted to go into different groups and discuss topics so this is a workshop and it's a workshop place we really wanted to do it in a kind of interactive way we will have few moderators that are helping us within the discussion and you have the opportunity to also speak to some of the most knowledgeable lawyers in the space um we have here y from uniswap we have uh also Karen from gnosis and uh we have Agata from status as well we are basically going to discuss uh just internally it's just uh I would say a workshop and um whatever questions we have whatever discussions you want to have internally and we also what we want to do is basically discuss how to talk to Regulators that was the title of our our topic uh on our Workshop because we see that many times more and more I would say Tech developers but also academics are asked to discuss with Regulators we're also uh seeing that there is more and more need to basically discuss certain topics there that could be very technical like account obstruction or other other discussions as well and I think that in this discussion we can also benefit one from from each other um so I welcome everyone to join the uh tables and you just join the group that you are mostly interested in so we'll have the group that is discussing defi one group discussing privacy and one group that is going to discuss specifically me in staking so if you're interested in one of those just let us know which one I would say that this this table should be the defi group if anyone wants to join uh this one will be privacy we'll also have varara helping with this one and if anyone wants to discuss me staking it's here and if you want to discuss any other topic that I have not mentioned let me know and we're going to create a new group as well any sorry stable coins okay perfect yeah I love this let's make this one stable coins there any other topic anyone okay so the discussions are not going to be recorded is really for our internal you know topics so I would say we can be a little bit more chill when discussing after uh the 30 minutes discussion we come back and everyone will just very very shortly report on this so privacy I think it's privacy is here defi is here uh this is taking and M yeah and this is stable coins okay hi hello this event we did an event on LinkedIn live for web Association oh my god oh so cool it's so nice to here glad you L huh or maybe we should just join the defi group would that be a thing yeah okay let's just bring chairs together uh no thank you you can just help with the moderation of the privacy and I met yeah yeah and she didn't know anything about oh I okay aming okay so yeah you can go there over they have two will only milon yeah that's the transaction volume from those 20 billion divide per person that's like no so the thing is it's interesting it's not even for person 95% of that 5 billion is institutional uh you a lot of African countries heavily import stuff and due to Dollar limitations so the biggest that has pushed stoc adoption is dollar limitations from local banks you know African countries are heavy so for me to buy something yes of course it's sa as well you don't trust don't you proba you don't want whatever we don't have a single currency that we can use within even with our neighbors you know Kenya borders tanzia but they have to trade in thear of course I would also use the stability stability right you flating as you saidan Cen that's a shame yes so that's why institutions are using St because of also the lack of dollars dollar shage yeah yeah and that's of course so we're talking about Banks right or we talk about um Banks very big companies just talking about fintech ftech okay right uh uh supplying St coins to that Clans that Clans will be importers exp of tea coffee F moving consumer oil and stuff like people in Nigeria who process about million oh wow this is actually great this a great example of like crypto because I think it's a positive change because like trading is like you know so yeah we can conclude that the biggest use case for that volume is institutional yeah inal use so are the banks so wait are people trading with the banks to get usdt or are they themselves they use viral service yeah and they with companies in like outside of Kenya right no within Kenya within Kenya they're also for instance if you have if you have usdt on one end you can just come in Kenya and set up ons it's not illegal as good thing so you tell someone okay depit it's over collateralized no just normal effects now that is another interesting thing you mentioned you see the table coin Market much better do they have the opportunity to speak at the Devcon Workshop please come it's not that bad uh I think our group will start first because I know what we discussed so okay just two minutes two minutes I help you summarize it you need to come there if you can so I will start with a very uh like half a minute introduction our group was talking about stable coins and we were very interested to see how other jurisdictions regulated stable coins so if you can join me that was the summary but then we went into reverse solicitation and different topics so yes here how many minutes uh just two very short hi guys my name is what's your name and where I coming from my name is kakai from Nairobi Kenya and yeah awesome to be here so yeah our group was talking about stable coins but for context we had to like give at least a bit a little bit of background from our perspective on what we understand as stable coins so fact number one was that did you know in Kenya alone about5 billion was transacted in 2024 uh in stable coin transaction and the average number of consumers in Kenya is about 3 million people who are actively using crypto out of a population of 55 million the average uh the number of stable coin transactions in Nigeria was uh about 20 billion do in 2023 alone now the biggest use cases for this specific jurisdiction and similar to a lot of African countries is because there's a lot of dollar restrictions and dollar shortages the government really or the central banks really hold on to the dollars so there was a very big demand for a parallel dollar market so all all everybody is doing Imports exports and all that uh found stable coins as an option because with stable coins you could transact $300 million in trade as a single entity I mean a bank can't an African Bank can't give you $300 million and if they did they'll give you at a very expensive rate stable coin issues provided very cheap dollar rates so that was the context for why we are passionate about stable coins and why a lot a lot of Kenyans on that table St okay awesome so in terms of stable coin regulations uh African countries do not have any form of stable coin regulations but the only country that has some form of virtual asset service provider regulations is South Africa 300 companies have submitted the applications down there uh we are working on uh pushing for Kenyan regulations but then again it's vasp or Casp regulations not stable coin regulations that means a lot of stable coins that will be used in Africa for all those volumes would look towards Europe for how they're either regulated in Europe or Japan and Singapore and um just pick it up from there I mean so that's now diverted our attention to look at mic what does mic say about stable coin so there asset reference tokens and E money I won't get the details of that but one uh one two things we looking at was the micers requirements on reserves so first question was uh how much does mic uh look at how much stable coin issue have a reserve in Micah I think it was about 15% but um then uh the mood question was that only works for guys who are issuing liquid stable coins like usdc where you deposit uh US Dollar on Circle account Circle mint and they s in usdc but if you are doing a bond backed stable coin like Mountain protocol or like uh or any other Bond back St coin whereby your backing is not a liquid Dollar in a bank but it's actually a treasury bill how would your classification look like under mic so we were still brainstorming on that then number two which is of Interest was decentralized uh stable coins so there's an um decentralized table coins the question was the M question again for us to think about was there's an exemption for and Mica uh on decentralized projects like um like decentralized projects are sort of Exempted or they don't want to be dealt with for now so does that mean that as a stable as a decentralized stable coin issuer I can plead that exemption and continue circulating my stable coin across Europe so that is something to think about and uh then that now led us to reverse solicitation and uh offerings and those conversations around now if you are offering to Micah to European Union citizens you need to comply with Micah or if you're not so so what is actually the definition of offering is does the fact that your website is in French automatically imply that you're circulating to French citizens if so how will that look like or should we just uh shut down yoursite so what is uh how does shutdown look like so shutdown we talked about thank you very much we will need to wrap it up thank you with there are three groups each three minutes so yes thank you again I tend to take a lot I'm I'm a lawyer we can continue the discussion afterwards the next group who's ready amazing okay so it looks like I have 9 minutes and 15 seconds on this screen you have two minutes okay um so we talked about staking and me um when you think about staking you almost kind of put a couple different buckets of like where are the threats to staking right now one you got things like igen ler and reaking two you have things like liquid staking tokens so the rocket pools and Leos of the world um and then you have kind of the idea of me which touch on in a second and there's kind of this fourth bucket of why do Regulators think that validators are like this Golden Goose of like if we regulate the validator this will solve everything um and that comes down to things like execution and settlement and also like who's the actual person effectuating transactions on a blockchain they want to think it's the the validator truth is the validator has like is very simple it has no role other than to propose transactions to the network and to attest to them um this leads us into meev and who knows what proposer Builder separation is PBS we got a couple that that's essentially this idea that the validator is this very simple actor they propose things to the chain they attest to them on chain and if you allow them to build the blocks what you're going to create is a centralizing aspect to where the person who's the best at building blocks will actually get all of the stake that means we will have essentially one validator for all of ethereum that's not good so proposer Builder separation is this um protocol designed to remove the building aspect from the validator which we see today on ethereum layer one since the merge um and it created this role called The Block Builder um which we see today there's a couple main block Builders and that's now another point of centralization we need to further push out to the edge um this all comes with the idea that when you deal with centralization you want to minimize it and then push it to the edges on the far extremes because then you can deal with them in a much better manner um in the next 20 seconds I'm going to talk about me very briefly one me most of it sandwiching is down 50% over the last year this is because we have great tools like orderflow auctions from um Med blocker and Flash Bots protect then the thing we need to think about when we think about me is that most of me is created when a user makes a mistake on chain or when a user actually SS slippage limits too high this happens because users are not informed about what they're doing on chain it also happens because we have terrible uis from front ends and so as we know how to minimize um errors from users and create better front ends over time we're going to minimize meev even further and further um I got more thoughts but maybe your name oh uh Reed lead policy at flash Bots you can come talk to me thank you next group perfect so what did the defi group discuss so hello my name is Alis bti well in our table we talk about uh I think we focus too much time in what is decentralized um we U talk that probably we need just to talk about legal Frameworks in the world we need to just have definitions um about what is decentralized and what is defi as well um we discuss about realities uh Africa reality in legal framework Latin America reality in or sou America reality in legal framework um we conclude and we have talks about the standardization of um regulation that that could be that the ideal stage of have regulation in the world but um we were conss that it could be really hard because we have different different cultures we we are in different stage of um crypto and defi uh adopts in different countries so there were talks about education that is really really important to have interaction with regulators and and for them to understand the Tes issues and the technical and process of defi what is defy um we talk about uh the importance of motivate Regulators as well to use promote and have regulations and um understand uh understood that that the discussions um important in regulation is to help protect consumers as well so um that can be a motivation for some Regulators as well and some governments so those are some of those um that's that was the things we talk about than you thank you very much and the last very important group on privacy it's very important everyone has notes so thank you for preparing oh I have to thank my team for preparing for me we so uh my name is pranai I'm a lawyer from India and uh we represent blockchain and emerging technology a lot our table was talking about privacy one of the core things p uh pointed out to us was at the heart of blockchain is being able to identify everything and Trace everything so privacy and blockchain do sort of run against each other and there has to be a conversation on how despite the technology being there to identify every single individual in the blockchain and participating the system system needs to be there to effectively allow for privacy to exist in a blockchain system where everything is recorded and everything can be traced down to the last number and down to the last hash um primarily by Design it's whether the platform or how we integrate privacy layers into blockchain systems and how say oracles or uh validators would work towards maintaining privacy while also being decentralized is really the challenge it's also something that they spoke of on the stable coin part where how do you uh how do you retain two true decentralization um to to take the discussion forward we tried to lean on what are the current use cases of blockchain and again the consensus was that the real only existing use case of blockchain right now that's being effectively used is to move uh value from one point to another the transfer of value the transfer of money and the transfer of funds and if you talk about that use case the major challenge right now being faced by regulators and governments across the world is privacy and how to uh break down the Privacy walls and do enforcement of an anti-money laundering prevention of uh terrorist financing Etc while at the same time retaining the ethos of what is blockchain what is privacy and what is uh what the community and the industry really represents is an autonomy of how to use software to give yourself the ability to grow and to do trade effectively which you weren't able to do earlier um there are blind spots there are blind spots that exist even today that if we do start putting in systems in place how they may be exploited tomorrow by regulators and by governments uh validators or developers who are oracles or who hold this kind of data can be forced to give up this data whether that uh sharing of data is something the community or the public agrees with yet to be seen or tested so privacy is something that perhaps is is a larger more granular question that we're even seeing right now and despite so many very smart lawyers being on the table we could not come to any consensus on any single point of how to or whether to even preserve privacy there are camps that say moneya laundering isn't moneya laundering uh if you look at populations that have been either systematically or historically non banked and do not have access to banking if you go to them and say that this is money laundering that's unfair that's discrimination and to a very large extent it's depriving them of access to the financial world and that in itself is what Bitcoin and blockchain were there to solve so if we add a layer of uh identity and take away the autonomy from Trading digital tokens are we then excluding a certain set of the population of this globe from this technological revolution of being able to trade through blockchain by adding the layer of uh identity using a misnomer perhaps that this is breaking a law that is moneya laundering and with that with 30 seconds left on the clock I think that was the summary of our discussion thank you thank you so much for your contribution to this workshop and thank you so much for being an unofficial Devcon speaker so that is very hard to achieve so congratulations thanks everyone for joining us it was really amazing to have you and uh yeah we hope to see you in two years [Applause]