The views expressed in this presentation are the views of the author and do not necessarily reflect the

views or policies of the

Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they
represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any
consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.

Regulatory Challenges of FinTech

Motonobu Matsuo
Japanese Financial Service Agency
November 29th 2019
１
 - The nature of ongoing changes -

Current Status Ongoing Changes Possible Future

Digitalization of human life

Limited Usage Automatic accumulation of Accumulation of detailed

of Customer Data customer life-logs customer information

Bespoke services limited to high net

AI capability for big data analysis Bespoke services based on
worth individuals and large
and deep learning customer information
corporations

more customer-oriented
One-size-fits all products
business based on
driven by supply-side logic
customer info
(business to customer
model) (customer to business
model) 2
 6. What should regulators aim for?

Regulators should be guided by their ultimate goal of

best promoting national welfare by contributing to the
sustainable growth of the national economy and wealth

Growth of players Business strategy

who can create with foresight
shared values and Customer protection to cope with
win customer legacy assets
confidence

Prepare environment Encourage banks to direct

and eliminate obstacles Take timely and their businesses with
in a forward-looking adequate measures foresight, not protective
manner “convoy policy”
 1. Finance Digitalization Strategy
 Achievements by the JFSA in Business
Year 2018:
 Launched “FinTech Innovation
Hub” and gathered information
through interviews with FinTech
100 companies, etc.
 Supported innovation by “FinTech
Support Desk” and “FinTech Proof-
of-Concept Hub”
 Strengthened international
networks through “FinTech Summit
2018” and “Blockchain Round-
Table”
 Developed infrastructure for
information utilization by financial
institutions
 Data utilization is making a great
change to the financial area,
particularly digitalization in overseas
through utilization of big data.
International debate on data policy is
rising. A new concept related to
crypto-assets has also emerged.
New Initiatives by the JFSA in five important areas
(1) Data strategy for utilization and privacy protection
 Encouraging financial institutions’ data project such as “information
bank”
(2) Innovation support
 Supporting various FinTech firms to create new financial services through
enhancing information gathering and support by “FinTech Innovation Hub”
(3) Function-based, cross-sectoral financial regulations
 Developing regulatory frameworks based on functions and risks to respond
to the digital transformation of financial services; payment regulations with
cross-sectoral and flexible structures, and cross-sectoral regulatory
frameworks for financial intermediation
(4) Digitalization of financial regulation and infrastructure
 Developing efficient financial regulation (RegTech / SupTech Ecosystem)
and infrastructure through digitalization
(5) Global issues
 Ensuring cyber security and grasping the latest trends in technology such
as blockchain; holding “Governance Forum (tentative name)” to discuss
distributed financial systems with a multi-stakeholder approach, and
considering responses to a new concept related to crypto-assets
2
 - FinTech Support Desk -

• The JFSA established the FinTech Support Desk as a one-stop service for FinTech businesses.
• It clarifies how existing rules will be applied to innovative businesses.

 Established on 14th December, 2015. By end-June 2018, there have been 602 cases seeking clarification.
 Out of 498 cases seeking clarification on enforcement of rules, around 80% is for licensing issues, and
others are the application of rules for financial institutions.
 In the 345 completed cases, we clarified that the financial laws and rules are not applied for around
40%.

【Cases seeking clarification in 【Composition of completed cases】 【Timeliness in rule clarification】

rules application】 Others （345cases） （Out of 345 cases）
Application of 140
FI rules 7%
（498cases） 120
15%
100
80
60
41%
Licensing 52% 40
85% 20
0
Compliance Compliance Day1 Day2～ 1W～ ２W～
needed １Week ２W
not required

5
 - FinTech Proof of Concept Hub -

 The JFSA established “FinTech Proof of Concept Hub” aiming for supporting certain parties which
conduct innovative projects (proof of concept projects) that leads to greater user convenience and/or
productivity of companies in Japan.
 For each selected proof of concept project, the JFSA will set up a special working team within the JFSA
in cooperation with other relevant authorities if necessary.
 The special working team will continuously support the project. It will give advice to the parties on
issues related to compliance and supervision, etc.

Parties to conduct
a proof of concept Achieve
project

Request for
consultations Innovation
Advice
Invite
participation for Introduce Participate/Cooperate
Other Relevant the working contact points
team
Authorities JFSA Financial
Industry
Special working Team
Participate/Cooperate 6
 Technological innovation
Crypto-assets Decentralized financial
technologies

Crypto assets are Public authorities have overseen financial

borderless by nature. systems mainly by regulating and
Can national supervising intermediaries.
regulators effectively How will they oversee financial systems
address the where decision making and
challenges? responsibilities are distributed among
diverse stakeholders?
• AML/CFT
• Directory
• Platforms

What do you think are the risks and opportunities posed by technological
innovation? 6
The Blockchain based Fin System and reduced regulatory enforceability
Blockchain could eliminate intermediaries from certain No intermediaries to
Decentralized regulate
area of the financial ecosystem

Once the system starts its operation, it continues

Autonomous Cannot stop the service
without third party intervention

Blockchain can accommodate pseudonymity and more

Anonymized sophisticated anonymity
Reduced traceability

Once the data is recorded, no single party can modify or

Immutable No ex-post remedy
delete it

By nature, networks created by blockchain are hyper-

Globalized Jurisdictional borders
globalized and digitalized

Anyone can create a new blockchain network and

Open Obscured responsibility
anyone can join it

Regulation alone could not be enough to achieve regulatory goals when the
financial system becomes highly decentralized…
[FYR] G20 Communiqué in Fukuoka -excerpt
Finance Ministers and Central Bank Governors Meeting

13. Technological innovations, including those underlying crypto-assets, can deliver significant
benefits to the financial system and the broader economy. While crypto-assets do not pose
a threat to global financial stability at this point, we remain vigilant to risks, including those
related to consumer and investor protection, anti-money laundering (AML) and countering
the financing of terrorism (CFT). We reaffirm our commitment to applying the recently
amended FATF Standards to virtual assets and related providers for AML and CFT. We look
forward to the adoption of the FATF Interpretive Note and Guidance by the FATF at its
plenary later this month. We welcome IOSCO’s work on crypto-asset trading platforms
related to consumer and investor protection and market integrity. We welcome the FSB’s
directory of crypto-asset regulators, and its report on work underway, regulatory
approaches and potential gaps relating to crypto-assets. We ask the FSB and standard
setting bodies to monitor risks and consider work on additional multilateral responses as
needed. We also welcome the FSB report on decentralized financial technologies, and
the possible implications for financial stability, regulation and governance, and how
regulators can enhance the dialogue with a wider group of stakeholders. We also
continue to step up efforts to enhance cyber resilience, and welcome progress on the FSB’s
initiative to identify effective practices for response to and recovery from cyber incidents.
8
New Forum – Open the door for the multi-stakeholder discussions

2019/9.5
FIN/SUM 2019 [Tokyo]
2019/3
Blockchain Round-table [JFSA] Further dialogues among wider stakeholders

2019/6
G20 High-level Seminar on Financial Innovation March 2020
[Fukuoka] Forum for Stakeholders
G20 Summit ［Osaka］
Photo by Nikkei in Decentralized
Multi-stakeholder discussion among regulator,
Designing Multi-Stakeholders Cooperation in blockchain-based
economy
Financial System
developer, academia etc. Photo by Goodway
Shin’ichiro Matsuo* (Research Professor, Georgetown Univ.), Mai
Santamaria (Head of Financial Advisory, Ireland Ministry of Finance), [Tokyo] ※planned
Allen Piscitelle (Blockstream), Shigeya Suzuki(Project Professor, Keio
Univ.), Akihiko Yoshida (Deputy Commissioner, JFSA)

G20 High-level Seminar on Financial Innovation

[Fukuoka]
*Jun Murai, Professor, Keio University
Adam Back, CEO, Blockstream
Brad Carr, Senior Director, Digital Finance, International Institute of Finance
Klaas Knot, President, De Nederlandsche Bank, and Vice Chair, FSB
Shin’ichiro Matsuo, Research Professor, Georgetown University
Photo by Nikkei
Implication of Governance for “DeFi” learned from the Wisdom of
Internet Governance
Shin’ichiro Matsuo* (Research Professor, Georgetown Univ.), Jun
Murai (Professor, Keio Univ.), David Farber (Co-Director, Cyber
Civilization Research Center, Keio Univ.)

9
Thank you.