How Are Countries Regulating Cryptocurrency? Understanding the Systems of Japan, the U.S., and Europe Through Five Layers ("So That's How Blockchain Works Ep.21" Yoshihiko Uchida, Yuya Sakai, Shinya Otsuga)

"So That's How Blockchain Works" Ep.21

In this podcast, Yoshihiko Uchida, who has a background in banking supervision at the Bank of Japan and the Financial Services Agency, and is currently teaching blockchain at Shunan University, Yuya Sakai, a founder of a gourmet app who has built a Web3 business by combining blockchain with Web2 services, and Shinya Otsuga, deputy editor of the crypto media "New Economy," introduce what you need to know about blockchain today.

In this 21st episode, we organized the current state of cryptocurrency and financial regulations across countries, based on the discussions from episodes 19 and 20 regarding "market stability and financial order."

First, we presented a framework that categorizes regulations surrounding cryptocurrencies into five layers: "the asset itself," "actions related to issuance," "intermediation," "market infrastructure (technology)," and "connection with existing finance." Just as automobiles are regulated by layers such as vehicle type, manufacturing standards, dealerships, traffic rules, and license plates, we suggested that "regulations surrounding cryptocurrencies can be understood more easily when analyzed by their subjects and functions."

Based on explanations at the time of recording, we discussed the U.S. (the Genius Act targeting stablecoins and the ongoing debate on the Clarity Act regarding the distinction between securities and commodities), the EU (the cross-sectional MiCA), Japan (the differentiation between the Payment Services Act and the Financial Instruments and Exchange Act), as well as discussions on CBDCs and deposit tokenization in Hong Kong, Singapore, the UK, and China, confirming the differences in their respective aims.

Furthermore, we organized regulations from five perspectives: "who bears the liabilities," "who absorbs the losses," "who holds customer assets," "which laws apply," and "who and how to stop in times of crisis." By comparing these with the earlier five layers, we aimed to reveal the common structural elements in the regulations of various countries.

Despite differences in legal texts between countries, we noted the international principle that "the same activity and the same risk should have the same regulation (same activity, same risk, same regulation)," and emphasized that the most important perspective is how cryptocurrencies connect with existing finance. We also explained how to monitor and control the risks of one side's turmoil affecting the other side due to this connection.

Additionally, we explored the question of whether authorities can intervene in public chains as financial infrastructure during crises, touching on bank capital adequacy regulations.

Finally, we raised the issue of the structural limitation faced by regulatory authorities, which is to "cooperate globally in normal times and prioritize national interests in times of crisis (i.e., become local)," using Japan's response during the FTX collapse as an example.

The next episode, Episode 22, is scheduled to be released on October 20, 2026. We will provide a summary of "Existing Finance × Blockchain," reflecting on transactions, credit, stablecoins, DeFi, and financial regulations that we have covered so far.

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