Members of the House of Representatives Discuss Web3, Reasons Seen as Promising for Regional Revitalization Even in the “Winter Age”
Decentralized network "Web3" based on blockchain and token-based technology has become a buzzword and has been actively discussed recently. On the other hand, to see what Web3 will change and what changes will occur in the financial sector, it is necessary to look at the essence of technology, not just phenomena. Yuichiro Ito, Director and CFO of Finatext Holdings, Junichi Kanda, Member of the House of Representatives, Masaya Kubota, Partner of World Innovation Lab (WiL), along with Takashi Okita, Chairman of the Fintech Association (moderator), talks about the expected changes in the financial field at Web3. rice field.
*This article has been reconstructed based on the content of the lecture at FINTECH JAPAN 2022 hosted by the Fintech Association in July 2022.
●Where should you pay attention to changes in the financial sector due to Web3?
“Web3 (Web3.0)” is attracting attention as a group of services that apply blockchain technology. It is expected to create an economic zone different from the conventional Web 2.0 where data and contents are concentrated on the platforms of some giant tech companies.
However, at present, many people's perception is "What is the essence of Web3?" Especially in the financial field, it is not clear what kind of value will be created by decentralized management of information. Against this backdrop, panelists will discuss global and local phenomena.
Mr. Junichi Kanda, a member of the House of Representatives from the Bank of Japan, who was also involved in the drafting of the "NFT White Paper" drafted by the Liberal Democratic Party's NFT policy review project team, said, "As technology advances, games, idols, anime, etc. can be proud of the world. I would like to provide support from the perspective of legal development so that Japan can take the initiative in content."
Mr. Masaya Kubota, an investor who conducts investment activities globally, is based in Tokyo and is involved in investment support and startups.
Mr. Yuichiro Ito, who supported "Embedded Finance," in which non-financial businesses incorporate financial services into their own services through software development, said, "Financial services are the transfer of value and risk." So, he is paying attention to how financial categories such as asset management, insurance, lending, and remittance settlement will be updated with Web3 technology.
The reason why the “NFT White Paper” draft was created in two months
Moderator Takashi Okita first asked Mr. Kanda, ``Where did the discussion of Web3 start within the Liberal Democratic Party and where is it heading?''
Mr. Kanda said, "The 'NFT White Paper' draft was announced in March 2022, but the project team was established in January of the same year." In the background of the speedy creation, it is said that blockchain and crypto technology are positioned as pillars of the growth strategy.
Starting with the Digital Agency, the government has been promoting digitization and DX, and We3, NFT, and Metaverse are positioned as growth fields that will take the next step. Mr. Kanda said, "The total amount of NFT transactions in 2021 is said to be 40.9 billion dollars (about 4.71 trillion yen), and it is clear that there is an explosive growth trend."
In response to this situation, it is necessary to start as soon as possible, because if it takes time to develop systems such as the tax system, it will cause a great loss for Japan. Against this background, regarding the creation of the white paper, ``Unlike the bureaucrat-led approach so far, politicians will lead the writing directly on their respective career fields, and will make full use of their personal connections to organize the points of discussion. We asked a lawyer who is familiar with the field to help sort out the issues."
Mr. Kanda said, "The advent of Web3 is a big opportunity for Japan," and explained that this white paper also shows a sense of crisis that we must not miss this opportunity.
The crypto market is in a “winter period,” but there are some bright spots
Fintech Association Takashi Okita asked Mr. Kubota, "How do you see the global Web3 situation?" Kubota said, "The amount of money invested in global Web3 startups will reach $900 million (approximately 1.3 trillion yen) in crypto (crypto asset) VC investment in the first half of 2022. '' he said.
Although the amount has decreased compared to the same period last year, "Looking at the market as a whole, 72 of the top 100 listed token companies have seen their corporate value decline by more than 90%." So, it can be said that the amount of investment is by no means small.
Approximately 15,000 people participated in the world's largest NFT event "NFT.NYC 2022" held in New York in June 2022. “Compared to the 200,000 to 300,000 attendees of Comiket in Japan, the scale of the event was not large, but the enthusiasm of the people at the venue was great,” says Kubota.
Furthermore, while understanding that the market is in a ``winter state,'' he said, ``I am filled with the mindset that I am in the process of cleansing the industry and the industry in order to become stronger. I'm convinced it's real."
There is a lot of momentum to break crypto assets from mere speculative objects, and Kubota says, "As the market has just started, I feel that we should look at it with a long-term perspective and perspective."
After arguing that the cycle of the industry experiencing "winter conditions" has been repeated many times in the past, "this time the macro market environment itself is severe," he said. He said that the number of use cases will increase in the future by players who have passed through.
Stablecoins will dramatically improve the efficiency of financial trading markets
Next, Mr. Okita asked Mr. Ito about the use cases he would like to focus on with stablecoins. Mr. Ito said that the use case of stablecoins in the settlement area "is difficult to create global regulations from the perspective of AML (anti-money laundering)," but it has the potential to reduce remittance costs all at once. did.
The use case that Mr. Ito is particularly interested in is the reconstruction of the trading market. “The stock market and the derivatives (financial derivatives) trading market are very inefficient, and I think we can make them more efficient with stablecoins,” he said.
A symbolic incident is the March 2022 incident involving the suspension of nickel trading at the London Metal Exchange (LME). The price of nickel, which is used in the manufacture of EV batteries and other products, has tripled in just two business days due to the invasion of Ukraine. In response to this, the LME decided to suspend trading, cancel the executions for several hours before the suspension, and roll them back to the day before the suspension.
As a result, many brokers have been forced out of business due to losses, but Mr. Ito said, "Financial exchanges are still experiencing such old-fashioned things." The background is that "the movement of money is slow and there is a lead time for remittances, so there is a counter risk". Stablecoins can reduce remittance costs and lead times to as close to zero as possible, making it possible to efficiently operate complex global trading markets.
Already, some companies operating exchanges are exploring the possibility of using stablecoins for derivatives trading, dramatically streamlining trading. Mr. Ito said, "Blockchain-native ideas are also being accepted in conventional finance," and said that in a year or two, there will be examples in various fields.
● Viewpoint of “user protection” as important as use cases
Kubota responded to Ito's remarks by saying, "Crypto is said to have no use case, but in reality, crypto accounts for 4% of remittances from the US to Mexico." Conventional remittances take a week to 10 days and incur a 10% fee, but with crypto, the remittance is completed the next moment and the cost is low.
NFT also returned $390 million to creators in 2021. “Considering that YouTube returns $1 billion a year to creators, the fact that this amount of money has been returned in about a year since the emergence of NFTs shows that various use cases are sprouting up in this area. You could say it's the situation," Kubota said.
Mr. Kanda also said, "As a government, we attach great importance to the use cases of Web3 and NFT in order to gain the public's understanding." The reason for this is that "there are such convenient things. If we can show that such things can be done, the public's understanding will be further enhanced, which will lead to system development and policy planning."
Another important aspect is user protection. Although the spread of new technology is accompanied by accidents, it is important to minimize the damage. "Cryptocurrency trading has a history of losing its momentum due to cases of cryptoassets being stolen due to unauthorized access," said Mr. Kanda. He said that the balance between "offensive" and "defensive" will be an important point in gaining the public's understanding.
Mr. Ito said that there are already use cases in Japan, and it is also important how to promote them. For example, Mitsubishi UFJ Trust and Banking's yen-linked stablecoin "Progmat Coin" is an initiative that is quite similar to the scheme of "making exchange settlements more efficient with stablecoins" mentioned earlier, and is "personally I think it's important to further promote these advanced initiatives."
● Why is Web3 considered promising for regional revitalization?
Kubota says, "In the world of Web2, Japan was not good at building platforms." However, Japan has a winning edge when it comes to creating communities with content and delivering value to the world. Content and creative are becoming important use case categories for NFTs.
From the perspective of regional revitalization and community currency, Mr. Kanda said that cryptocurrency will be a mechanism to circulate money in the community. In addition, he says that mechanisms such as NFT, DAO, and Metaverse can be tools for strengthening communities that can transmit the appeal and value of local communities to the world.
Utilization of these can be efforts to solve social issues such as regional revitalization and the declining birthrate and aging population.
Mr. Ito also said, "In the world of FinTech, embedded finance has caused a distribution revolution in which non-financial businesses handle existing financial products."
After 2030, a product revolution will occur in which new financial products will be created and provided, and Web3 will be the technology responsible for this. “The immediate task is to lay the groundwork for the next 10 years,” he said.
Mr. Okita said, "While I feel that Web3 is gaining attention, there are still few people who embody it." I have.”
He also said that “power shift” is the essence of FinTech. Until now, the essence of FinTech has been a channel revolution that transforms the way traditional financial products are sold, but in the future, new value and new financial products that would never have been created without the Internet are expected to arrive. .
"Web3 will be expected to take the next step in disrupting existing industries and industries, just like Uber," concludes Mr. Okita.
