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2022　Decentralized Financial System and Economics

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Academic unit or major
Humanities and social science courses
Instructor(s)
Miwa Junpei 
Class Format
Lecture    (Face-to-face)
Media-enhanced courses
Day/Period(Room No.)
Wed3-4(W935)  
Group
-
Course number
LAH.A532
Credits
1
Academic year
2022
Offered quarter
4Q
Syllabus updated
2022/4/20
Lecture notes updated
-
Language used
Japanese
Access Index

Course description and aims

The financial regulations generally target the financial intermediaries with centralized governance system such as banks, insurers, asset managers and brokerage firms etc. The growing distributed ledger technologies underpinned by decentralized blockchain is giving rise to the new financial services that builds on the nature of autonomy and decentralization. This type of financial services will dilute the effectiveness of current regulations owing to such non-centralized nature.
The purpose of this lecture will aim at i) considering how we manage and maintain the effectiveness of financial regulations (financial stability, user protection, AML etc.) amid the rise of so-called DeFi (Decentralized Finance) that builds on nature of autonomy and decentralization, and ii) exploring the necessity of an auxiliary or alternative approach that is more suitable for DeFi
These issues will be addressed based on the implications of law and economics.
In this context, this lecture will also seek to design new governance mechanism for decentralized financial system and consider how we operationalize it. The history of internet governance will provide a good reference point to consider the nature of decentalized network.
In addition, this lecture will additionally address the contemporary concerns over BigTech’s entry to financial system in order to contrast the nature between BigTech and DeFi, and to recognize the comprehensive concerns inherent to the financial regulations and current financial system.

Student learning outcomes

The lecture will facilitate the understandings on the role of financial regulations and seek for enhancing the capability to contemplate ongoing changes of financial system from pubic policy perspectives. Building on the contribution to discussion and submission of reports, we will explore a possible or ideal governance system and an approach against decentralization of financial system and cultivate the knowledge of new finance space such as Decentralized Finance (DeFi).

Course taught by instructors with work experience

✔ Applicable How instructors' work experience benefits the course
I have undertaken the various roles in the area of financial services for over 20 years and engaged in Japan Financial Services Agency “Kinyu-cho” for over 16 years. I have experienced international standard-setting activities such as Basel II and III framework and engaged in the standard-settings under global regulatory reforms after great financial turmoil in 2008. My career has extended to various financial standard-setting activities - FSB, BCBS, IAIS, IOSCO and APEC as well as NGFS which is for regulator’s network on sustainable finance. Based on the experiences of international standard-setting activities and related domestic regulatory oversights, after 2017, my regulatory focus has extended to the area of FinTech and I have undertaken the position of Director, FinTech and Innovation Office firstly in JFSA. My focus of technology is relating to the blockchain and the issues of possible regime shifts of financial system based on decentralized financial technology. In this activity, I recognize the necessity of neutral and fair platform to discuss the blockchain issues by various stakeholders amongst academia, cryptographers, developers, regulators and so forth. I have contributed to building the fora, such as BGIN [Blockchain Governance Initiative Network] and studying the deep-dive issues through Blockchain Research Project in JFSA. I personally would like to contribute to enabling students to encourage and cultivate pragmatic views on finance - “New style of finance” with new paradigms together with you.

Keywords

finacial system, blockchain, Decentralized Finance, DeFi, FinTech, BigTech

Competencies that will be developed

Specialist skills ✔ Intercultural skills ✔ Communication skills ✔ Critical thinking skills Practical and/or problem-solving skills

Class flow

Class 1 - Class 7：Lecture style (sometimes "unconference style" discussions are exercised (esp. Class 4 and 7))
(*) At the Class 4 and 7, special guests who are working for blockchain business and regulation will be invited to have an intensive discussion with students (s.t. unconference style).
- Students are required to write the "Interim" and "Wrap-up" Report and submit it through T2SCHOLA. (*cares should be taken about the deadline of each report that will be indicated in T2SCHOLA)
- Questions other than the content of the class will be accepted by e-mails by the course coordinator (See the item of "Contact information (e-mail and phone)" below).
- Students have to submit an "Interim and Wrap-up report" (after Class 4 and 7) (*cares should be taken about the deadline of each report ) through T2SCHOLA for assessment.

Course schedule/Required learning

  Course schedule Required learning
Class 1 Overview of financial system and role of financial regulations　－　Interactions between Decentralised Financial System and Regulations Learning the global financial regulatory regime (G20, G7), comparison of financial regulatory and supervisory regime, the goal of financial regulations. At every end of class, home-working assignments will be provided while this is not required to submit. However, by doing the assignments, this will help you facilitate to write the Interim and Wrap-up Report which is required to submit and subject to the assessment.
Class 2 Overview of Blockchain and Decentralized financial system It is recommended for students to read FSB(2019）"Decentralised Financeial Technologies" in advance. Learning the transition to the decentralized financial system and its challenges. At every end of class, home-working assignments will be provided while this is not required to submit. However, by doing the assignments, this will help you facilitate to write the Interim and Wrap-up Report which is required to submit and subject to the assessment.
Class 3 DeFi and governance mechanism of Decentralized and autonomous organization (DAO) Learning the developments of DeFi, DAO and its related challenges from financial regulatory and supervisory perspectives. As this is moving and variable topic, the reference material will be updated before the class starts. At every end of class, home-working assignments will be provided while this is not required to submit. However, by doing the assignments, this will help you facilitate to write the Interim and Wrap-up Report which is required to submit and subject to the assessment.
Class 4 Governance machanism over Decentralized Finance, Unconference (welcoming guest and opening lecture), Submission of the Report It is recommended for students to read " A study on Governance for Decentralized Finance Systems, JFSA (2020)" in advance. Learning the governance model of multi-stakeholders' participations to community etc. The style of "unconference" - open style discussion- will be exercised upon the topics based the last 4 classes. The topics will be determined based on the selective questionnaire for students. After the class, students are required to submit a "Interim" Report for the last 4 classes and unconference discussions.
Class 5 Unconference (welcoming guest from JFSA and opening lecture), Mid-Summary, Submission of Report Lecture on money (currency, tender), digital money stable coins and crypto-assets will be made in light of the implications of economics. It is recommended to read the reference material that will be guided before the class. At every end of class, home-working assignments will be provided while this is not required to submit. However, by doing the assignments, this will help you facilitate to write the Interim and Wrap-up Report which is required to submit and subject to the assessment.
Class 6 CeFi (Centralized Finance) vs DeFi - contemplation of BigTech Learing the comparison between CeFi and DeFi, and challenges relating to the BigTech entry to financial system highlighting the concerns over competition and privacy etc. At every end of class, home-working assignments will be provided while this is not required to submit. However, by doing the assignments, this will help you facilitate to write the Interim and Wrap-up Report which is required to submit and subject to the assessment.
Class 7 Summary Governance machanism over Decentralized Finance, Unconference (welcoming guest and opening lecture), Submission of the "Wrap-up" Report The final class will wrap-up the last 6 classes. After the class, students are required to submit a "Wrap-up" Report .

Out-of-Class Study Time (Preparation and Review)

To enhance effective learning, students are encouraged to spend approximately 100 minutes preparing for class and another 100 minutes reviewing class content afterwards (including assignments) for each class.
They should do so by referring to course material.

Textbook(s)

nothing required.

Reference books, course materials, etc.

While the reference material will be provided thorough the lecture, the following webstite of JFSA reagarding "G20: Efforts on Governance Issues in Decentralized Financial Systems" is a good reference point to recognize the lecture. It is highly recommended to read the reserch papers on "Multilateral Joint Research Project."
https://www.fsa.go.jp/en/policy/bgin/information.html

Assessment criteria and methods

Interim-Report and Wrap-up Report (40%+60%)
*Interim report: around 3000 letters in Japanese and 2000 words in case of English.
**Wrap-up Report: around 5000 letters in Japanese and 3500 words in case of English.

The volume of letters and words is just for desirable level of submission. The contents of reports are rather prioritized for assessment.

Related courses

  • LAH.S437 ： Essence of Humanities and Social Sciences42:Consensus Building
  • LAH.A401 ： Digital Innovation in Financial Institutions
  • LAH.S438 ： Essence of Humanities and Social Sciences43:Financial/Economic Activities and Corporate Strategy

Prerequisites (i.e., required knowledge, skills, courses, etc.)

Hopeful: knowledge regarding finance and/or blockchain

Contact information (e-mail and phone)    Notice : Please replace from "[at]" to "@"(half-width character).

Course instructor: Jumpei Miwa (j-miwa1976_at_outlook.jp (Please replace "_at_" with "[at]" (half-width character)))).

Course coordinator: Takehiro INOHARA (inostaff_at_shs.ens.titech.ac.jp (Please replace "_at_" with "[at]" (half-width character)))).

Office hours

While contact before and after classes, or e-mail for an appointment is allowed, it is pereferable that questions and notions are actively raised in the class as the time of Q&A session is ensured in the class.

Other

This course is 500-level course. Tokyo Tech’s “wedge-shaped style education” enables students to pursue liberal arts education in a phased manner throughout undergraduate and graduate programs. Students are encouraged to take courses in the sequence of 100, 200, 300, 400, 500, and 600 levels. As such, master's students must begin from 400-level Humanities and Social Science courses in 1Q and 2Q of the first year, then proceed to 500-level courses. And master's students entering in September must begin from 400-level Humanities and Social Science courses in 3Q and 4Q of the first year, then proceed to 500-level courses. Students can register for 500-level Humanities and Social Science courses six months after their entrance (i.e. students admitted in April can register in 3Q and 4Q, and those admitted in September can register in 1Q and 2Q).

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