Legal and Technical Considerations in Digital Payments, Quantum Computing, and PrivacyEnhanced Technologies Performed by: Professor Takashi Kubota from Waseda University of Tokyo (Japan) Policy Talk Nonsense on Web 3.0 1. Though Japan has promoted Web. 3.0 since June, 2022, the digital payments environment seems "against" (Tera USD in May 2022: stablecoins were NOT treated in Japan, FTX Failure in Nov. 2022: toughest regulation adopted after the huge hack of coin check in 2018, and e-CNY's slow growth). 2. Promoter economists officially say "Prioritize industrial promotion over consumer protection." and "Follow Singapore and cut taxes drastically". However, consumer protection is prioritized in Japanese laws and Japan is an OECD member. Rather, more regulation on disclosure needed for collecting money by using governance token (NFT and DAO). : Economists should understand some basic legal principles. Quantum Computing - Technical pitfalls on digital payments should be also examined: 1. Traditional 51% attack in blockchain, etc., and 2. Development of quantum computing. With the advent of quantum computers in the near future, existing cryptography used in digital currencies can be broken. - Developing quantum-resistant cryptography is needed to prepare for the possible attacks especially by China, Russia and North Korea. However, there are still only few papers (ex. Swiss National Bank) published on CBDCs.  US NIST (2022): "If large-scale quantum computers are ever built, they will be able to break many of the public-key cryptosystems currently in use. This would seriously compromise the confidentiality and integrity of digital communications on the Internet and elsewhere. The goal of post-quantum cryptography (also called quantum-resistant cryptography) is to develop cryptographic systems that are secure against both quantum and classica computers, and can interoperate with existing communications protocols and networks." NIST (National Institute for Standard and Technology): US governmental agency established in 1901, developing cryptographic int'l standards. Reading “The Pay-Off (2021)” Gottfried Leibbrandt and Natasha de Terán, Elliot & Tompson 1. The Best seller not only in UK, but also in Japan. 2. One authors' mistake: Concept of Settlement is NOT the legal product (we have payment and set-off, though). 3. However, I totally agree with the following mentions: a. Regulators seem to control settlements, but in fact they have no perfect control over them. b. In settlements, even short-term ones, it is difficult to predict. c. The essence of settlement is risk, liquidity, and law/custom. d. There is no dedicated department to combat cyber attacks on payment systems, making it a regulatory loop hole. Proposing Technical Strategy 1. Two Issues: a. To adopt privacy-enhancing technologies (our "SK4SC"), which performs KYC (Know Your Customer) while keeping PKI (Public Key Infrastructure)-registered trading partners anonymous; b. To consider a Japanese security-enhancing strategy to develop new quantum resistant cryptography for the international standardization race. 2. Anonymization technology solves various legal issues: a. 2021 Amendment of Japanese Personal Data Protection Act allows the Personal Data transfer without consent of the individual, if adequately anonymized; b. Preventing foreign countries from collecting personal information legally (US CLOUD Act, Chinese Cybersecurity Act) and illegally (Hack by North Korea). 3. Proposed Japanese steps: a. To adopt our SK4SC in various PKIs; b. To change SK4SC quantum-resistant quickly when standardization of quantumresistant cryptography is to be made in 2024 by the US NIST; c. To accumulate implementation know-how and develop small applications for practical use; and d. To prepare international standardization by the Digital Agency. SK4SC Privacy-Enhanced PKI: Our "SK4SC”, which performs KYC (Know Your Customer) while keeping PKI (Public Key Infrastructure)- registered trading partners anonymous, can be a solution. Implications to Jurisprudence 1. Friedrich HAYEK, Denationalizations of Money, 1975: a. competition make ideal currencies (HAYEK: yes, Prevailing views: no < See next>); b. Abolish legal tender (HAYEK: contracts can solve, I: still necessary for tax and wages). 2. Katsuhito IWAI, On Currencies, 1998: Expectation to be received as money makes money function: Partly true for short-term interbank debts, but still, state governability is indispensable to stabilize the prices. 3. FERIX MARTIN, Money, 2013: Money is a: a. Transferable credit; b. Social technology (idea, custom); c. Three components (universal economic value, accounting system, decentralization of transfers) and d. Should be governed by democratic politics instead of "central bank independence".: I: It should be refined as rule-based and less discretional. 4. David ORRELL, Brief History of Money, 2020: Money has a dual nature of number and object, and both credit and commodity currencies have existed in history. Barter never existed in history.; tangibility should be reviewed. 5. Sociology (Niklas LUHMANN, etc.): Not only economic value, but Money can also define social relationships and mechanisms; law can adapt to it. HAYEK: State Monopolization Needed? 1. Hayek (1976) proposed abolishing the government's monopoly on issuing currency and leaving it to private currency issuers' competition in the market, so that the government cannot conceal the decline in the value of currency. 2. Saito (2020): Hayek's prediction that an 'ideal currency' would naturally emerge if left to competition among private issuing banks was too optimistic, given the not-so-long history of cryptocurrencies. Private issuers are not interested in creating an 'ideal currency' that is not profitable in the first place and argues that governments are still more trustworthy than the private sector.