Provisional Translation

Q.

I would like to ask about the virtual currency broker dealer Coincheck. The Monex Group is expected to announce its takeover of Coincheck today. It goes without saying that Coincheck has been operating as a quasi-broker dealer since before the outflow of virtual currency occurred. I would like to ask whether Coincheck as a member of the Monex Group will see its application for registration processed quickly so that it can become a registered virtual currency broker dealer.

A.

Since the G20 meeting, the word “crypt asset” has been gradually used in addition to the word “virtual currency”, a sign that perspectives on this continue to change around the world, and I believe we must take proper measures to the issue of virtual currency broker dealers. We have been conducting on-site inspections of several broker dealers and have pointed out a variety of their problems. It is not the case that some problems will bring down the entire system of the virtual currency related matters. The hash function, the function used in cryptography, as this is the basis for what is said to be the blockchain now in use. To use this hash function, it would not be impossible for a human to work it out in their head but it would inevitably take time, but a computer can do it in a flash. The technology that enables this could prove to be a major asset for Japan in future. Accordingly, we need to think, given that China has closed its market, how Japan can foster or cultivate this to a certain degree while regulating it in order to prevent the possibility that at the same time, people’s ignorance is being exploited and they are being drawn into investing by their desire to make money in some way at a time when interest rates are almost zero, and being able to quickly multiply their money for speculation purposes. There is no guarantee that some intentionally malicious people will not get involved, and we at the Financial Services Agency (FSA) must think carefully about how best to protect consumers and users so that the general public, participating in this as good-faith third parties, will not be pulled in or caught up in disreputable schemes and defrauded, as such schemes tend to draw in lots of people and lead to tremendous losses. In any event, the key issue is whether Coincheck has established an effective governance system, and I think that this would be in essence the same one being asked about Facebook’s information management. There is also the problem of bugs or holes that create difficulties in administering systems; you chase after one bug and, just when you think you have fixed it, another bug appears somewhere else. While taking whatever steps we can to address that, we must also consider ways of minimizing the damage, and that can be a difficult balance to strike.

Q.

In light of your comments, are you saying that, if Coincheck were to revamp its governance structure so that it could ensure proper governance under Monex, the FSA would approve its registration?

A.

That would depend on whether it would be able to successfully pass our checks.

Q.

On the topic of virtual currency, I have heard that the FSA is scheduled to hold a briefing this afternoon regarding the new measures, so could you please add to what you have just said and let us know your own views or those of the FSA on these measures?

A.

Perhaps you should hold any questions about technical details until 3:30 this afternoon.

Q.

Do you have any message on that?

A.

We have been conducting a series of on-site inspections of quasi-broker dealers – as we refer to companies before they have completed the registration process – and, as I said earlier, we will strictly address any problems that we discover in the interest of protecting users. As for any further details, the FSA representative will be giving an briefing today at 3:30 p.m.