Tag: Yogi Nelson

Artificial Intelligence, Blockchains, Japan, Yogi Nelson

Understanding Japan’s Crypto Landscape: Key Concepts Explained

Yogi Nelson

Namaste Yogis!   Welcome to the Blockchain & AI Forum, where your technology questions are answered. As a bonus, a proverb is also included.  Today’s question, was submitted by Chisato and she wants to understand the evolution of crypto regulations in her native Japan.

Chisato, you came to the right place. Let’s examine the Japanese regulatory milieu of crypto by dividing the eras into three distinct periods, and ending by defining four key terms.  A big thanks and acknowledgment to So Saito and Kazuki Imanari of So & Sato Law Offices for the source of this information:

Click to access Crypto-Regulations-in-Japan-2024_240904-1.pdf

Early Era: 2014 – 2017   

Japan was an early leader in crypto but after the Mt. Gox exchange collapse in 2015, crypto fell from grace.  One year before the collapse of Mt Gox, the Japanese government decided to not regulate the industry and instead asked the industry to self-regulate.  It didn’t work. Although some retail users fled, crypto developers continued to build and true believers remained and by 2017 Japan was home to the number one crypto exchange.

Era of Stricter Regulations:  2017 – 2020

In America, stricter regulations always happen after a catastrophe; Japan is no different.    In 2018 there was a massive hacking, known as the Coincheck incident, and immediately thereafter Japanese financial regulators came charging.  Exchanges were forced to comply with new regulations, leading to a shake-out in the industry.

Web3 Makes the National Growth Strategy List:  2021 – Present

In 2021, the Japanese government approved a Web3 White Paper wherein it committed to Web3 as a national priority.  They quickly followed that action by being among the first to enact stablecoin regulations.   

Let’s now examine the Japanese definition of four key crypto concepts. 

Stablecoins

As noted above, Japan was a pioneer in crypto regulations and consequently was one of the first to establish stablecoin regulations.  In Japan, stablecoins pegged to fiat currency are defined as electronic payment instruments and require the issuer to obtain a license. Stablecoins classified as assets are subject to crypto regulations, while stablecoins classified as securities are subject to securities regulations.

Non-Fungible Tokens (NFTs)

NFT regulations are generally clear.  The basic rule says, that if the NFT does not function as a payment instrument it is not considered a crypto asset.  Japanese regulators say “pure” NFTs have technical features that prohibit their use as payment instruments.  Japanese regulators also examine whether the quantity and price of NFTs are suitable for payment instruments.  Bottom line:  NFTs are not regulated in Japan; they are treated analogous to trading cards.  However, if an NFT is linked to a real-world asset, e.g. real estate, it could be considered a security. 

Crypto Lending

Crypto lending is not regulated in Japan.  What do I mean by crypto lending?  In crypto lending, a service provider borrows crypto assets from users for a certain period of time and pays a lending fee in exchange.  Why is this not regulated?  Because crypto assets are not considered money, therefore the Money Lending Business Act does not apply.  However, crypto lending maybe regulated in cases where the service is considered custody. 

Crypto Taxation

Death and taxes are inevitable everywhere, including Japan.  In Japan, tax authorities define crypto asset profits as miscellaneous income.  Profits generated by crypto asset transactions are taxed based on the personal tax bracket of the individual.  Income tax rates in Japan go from 5% to 45%!  Ouch. 

I end now with a proverb from Japan, where they say: “the mouth is the source of disaster”.

Until next time,

Yogi Nelson

Artificial Intelligence, blockchain association, Yogi Nelson

How to Master the Metaverse: A Guide to UON’s MSc Program

Yogi Nelson

Namaste Yogis.   Welcome to the Blockchain & AI Forum.  Here no question is too mundane.  As a bonus, a proverb is also included.  Today’s question, was submitted by Javier from Saint Petersburg, and he wants to how to master the metaverse?

Javier, you came to the right place.  I had to research your question. I didn’t believe it possible to earn a degree in Metaverse, much less, a masters degree, from an accredited university.  The good news is, it’s possible, the “bad” news is only one accredited university in the world offers the program, meaning it has a monopoly.  Let’s go over the facts together.

We begin with the obvious, what university and where is it?  The answer, the University of Nicosia (UON).  UON is located on the beautiful island nation of Cypress.  Cypress, for those unfamiliar, is located in the Mediterranean Sea.  About 2/3 of Cypress is Greek speaking and aligned with Greece.  In fact, UON has offices in Cypress and Greece.  The other part of Cypress is aligned with Turkey.  In 2013, UON was the first university to offer a masters degree in blockchain and crypto technology and in 2024 the only accredited university in the world to offer a masters in metaverse studies; hence, UON is recognized as a pioneer and a web three native institution. 

How does one get accepted in the program?  According to UON, only applicants with a B.A. from an accredited university need apply. No need to have a B.A. in computer science; any B.A. will suffice declares UON on its website.  B.A. in any subject makes sense given the Metaverse is a new discipline and when I describe the graduate course work, I think you will agree also.  The second requirement is English proficiency.  UON says applicants must score 550+ on the TOEFL.

After completing 3 fully loaded semesters that require 1.5 years, graduates earn the distinction of MSc in Metaverse.  Nice!  According to UON:

“The MSc in Metaverse is designed to provide participants a specialized program of study to become competent professionals in the field of Metaverse. Graduates will be able to develop computational design, programming skills and acquire hands-on cutting-edge experience, while cultivating analytical and creative thinking on the applications of Metaverse.”

Now, let’s take a look at the six mandatory general requirement classes for all students. 

  1. NFTs and the Metaverse
  2. Metaverse Technologies and Applications
  3. Open Web Applications and Digital Assets
  4. Extended Reality
  5. Virtual Worlds Architecture
  6. Social, Legal and Ethical Issues in the Metaverse

After completing the core classes, students must decide between two tracks:  metaverse management or metaverse development.  Let’s examine the options:

METAVERSE MANAGEGMENTMETAVERSE DEVELOPMENT
Metaverse EntrepreneurshipSmart Contract Programming for Metaverse Applications
Emerging Topics in the MetaverseVirtual and Augmented Reality Development
Virtual Economies in the MetaverseUser Experience and Interactive Design
Data Science in the MetaverseMetaverse Game Development
Metaverse Token Economics 

For the grand finale, students must select between writing a thesis or a semester long internship approved by UON. 

Seven of the 11 program professors are on loan from the School of Business, Department of Digital Innovation.  The other 4 hail from social science, architecture, etc.  Now that you know how to master the metaverse, would you enroll at UON and which track would you prefer?  I would pick metaverse development!

Time to go but first a proverb from Somalia, where they say: “delayed gratitude belongs to the patient, and unfinished business to the persistent.

Until next time,

Yogi Nelson

Artificial Intelligence, Blockchains

U.N. AI Regulations: Insights from the Human-AI Institute Founder

Yogi Nelson

Namaste Yogis. Welcome to the Blockchain & AI Forum, where your technology questions are answered! Here no question is too mundane. As a bonus, a proverb is also included. Today’s question was submitted by Mr. Bunch from UCLA, and he asked if the United Nations is united on artificial intelligence regulations?

Mr. Bunch, you came to the right place. Recently I traveled to Geneva, Switzerland and met with two U.N. employees. We discussed numerous topics, including your question. I’ll answer you by sharing what I learned.

In 2020, the U.N. decided to launch an AI initiative related to regulations of emerging AI technology. Markus Krebsz, Professor of Management, University of Stirling, was selected to lead the investigation. Professor Krebsz is also the Founder of the Human-AI Institute. Four years later, Professor Krebsz produced a report titled, U.N. Economic Commission for Europe Working Party 6. For the sake of brevity and sanity, I’ll refer to the report as WP6. Besides, WP6 sounds like a fun rock band, and good time! Lol. Let’s examine what’s inside WP6, commencing with the purpose, followed by findings and recommendations.
https://unece.org/sites/default/files/2024-07/ECE_CTCS_WP.6_2024_11_E.pdf

PURPOSE OF WP6
WP6 provides guidance to member states (the U.N. calls nations member states because they are all members of the UN) for an overall approach to regulations of products and/or services with embedded AI systems or digital technologies. The author reports the most appropriate use of WP6 include:
• Setting legitimate regulatory objectives
• Identifying and assessing risk
• Identifying relevant international standards
• Establishing mutually recognizable conformity assessment procedures
• Setting market surveillance and other enforcement mechanisms
• To promote convergence of national technical regulations among agencies currently in place or yet to be developed.

KEY FINDINGS & RECOMMENDATIONS
Krebsz starts with an obvious but nevertheless important disclosure—zero risk is impossible. There is no way to avoid making an error when establishing AI regulations. Hence, constant evaluation of AI regulations is prudent.

Second, certain products/services may be intrinsically high risk to human society. Therefore, governments must assess risk and choose appropriate conformity assessment methods, say Krebsz. In high-risk situation, AI cannot be allowed to override human control and human decision, according to WP6. Krebsz cites the example of sophisticated diagnostic system, where even if the medical equipment could generate algorithmic decision-making, human decision making must be included.

The third recommendation concerns AI technology embedded within products. Krebsz notes consumers may not be fully aware certain products contain AI embedded technology. Thus, consumers might be surprised to discover the technology reacting in an unexpected manner. The solution is robust testing under various scenarios, say Krebsz. Krebsz applauds the National Institute of Standards and Technology AI Risk Management Framework for their work on this issue.

WP6 supplies a series of AI bullet point recommendations and policy guidance, including but not limited to:
• AI embedded systems should not impinge of human freedom nor cause bias.
• AI technology should not further widen the digital divide as outlined in previous U.N. resolution.
• No AI should cause mental health problems.
• AI should be designed to encourage trustworthiness. In other words, transparency under the hood of the technology.
• Scenario and simulation testing and evaluation of residual risk should be part of a national AI policy.

Apparently, Professor Krebsz’s report was a smashing success! The member states representatives adopted WP6 and all signed the corresponding resolution, also written by Krebsz!

Time to leave you with a proverb from Mali, where they say: “The bird that flies off the earth and lands on an anthill is still on the ground”.

Until next time,

Yogi Nelson

Uncategorized

Challenges and Opportunities in DeFi: University of Zurich’s Taxonomy Report

Yogi Nelson

Namaste Yogis. Welcome to the Blockchain & AI Forum, where your technology questions are answered! Here no question is too mundane. As a bonus, a proverb is also included. Today’s question was submitted by Liz from Paraguay, and she wants to know the latest university research findings on decentralized finance (DeFi).

Liz, you came to the right place. After receiving your question, it piqued my curiosity. Guess what? I found a treasure source of information! Before jumping into the findings, I’ll start by defining DeFi for new members to my blog.

Investopedia says, DeFi is an emerging financial technology, consisting of blockchains, software, and secure distributed ledgers, analogous to those used by crypto currencies. DeFI technology removes third parties and centralized institutions from financial transactions. DeFi challenges traditional finance by empowering individuals with the power to conduct peer-to-peer transactions. Now let’s discuss a research report produced by the University of Zurich, called “A Taxonomy for Decentralized Finance.”
https://www.zora.uzh.ch/id/eprint/254150/1/1_s2.0_S1057521924000152_main.pdf

Finding 1: Ethereum Reigns Supreme
Ethereum founders loved Bitcoin but noticed its limited utility. Their solution was to create Ethereum in 2014 as a second generation blockchain project that could be programmed to run on “smart contracts.” Smart contracts are code written into a blockchain that executes the actions two parties agree to outside the chain. By automating these actions, the need for an intermediary or trust between the parties is removed, and BOOM, you get the foundation upon which DeFi is constructed.

DeFi start-ups love Ethereum. In fact, 36% of all DeFi start-ups use Ethereum as their base layer technology. There are alternatives to Ethereum, including Solana, Cardano, etc. but no other layer one blockchain comes close to Ethereum for DeFi start-ups.

Finding 2: DeFi is Moving Towards Decentralized Governance
DeFi start-ups are built with the goal of eventually becoming decentralized in their governance. This is not surprising. After all, DeFi is constructed on the premise, perils, and promise of decentralization. Earlier this year, the Securities and Exchange Commission (SEC) approved Bitcoin and Ethereum ETFs. The SEC relented and finally recognized the decentralized nature of their governance. Other decentralized layer one blockchain projects may also receive SEC future approval relatively soon.

Finding 3: DeFi Systems Need Interoperability
Blockchain projects are monolingual. Essentially, blockchains don’t “communicate” well with each other. DeFi will not surpass traditional finance until interoperability becomes a DeFI reality.

Today, DeFi projects are essentially incapable of interacting with one another. Yes, there are “bridges” that connect blockchains. However, existing bridges are slow, weak, and incapable of sustaining a large-scale financial system. As Cardano founder Charles Hoskinson has said dozens of times, “… blockchains need to become as interoperable as Wi-Fi for mass adoption to take root.”

Finding 4: Regulatory Risk
DeFi pioneers are sailing unchartered regulatory waters. I’m not referring to fraud. Fraud is illegal regardless of technology and there are plenty of existing laws against fraud. I’m referring to the failure of Congress to pass DeFi legislation. The result? The SEC has stepped into this power vacuum and has deployed its enforcement authority to decide DeFi policy! Unelected bureaucrats are the bosses. What’s worse, SEC is a captured regulator. Captured by who? Captured by the industry it regulates and the incumbents are not too keen on opening the door to competition.

Let’s end with a proverb from Paraguay, where they are fond of saying: “… a lamb with a little mark will eventually leave the flock”.

Until next time,

Yogi Nelson

Uncategorized

Exploring Panama’s Crypto Friendly Banking at Tower Bank

Yogi Nelson

Namaste Yogis. Welcome to the Blockchain & AI Forum, where your technology questions are answered! Here no question is too mundane. As a bonus, a proverb is also included. Today’s question, was submitted by Ramonita, and she wants to know if there are crypto friendly banks in Panama?

Ramonita, you came to the right place. I suppose you ask because you own crypto assets and want options beyond American banks. The short answer is yes, Panama does have crypto friendly banks. Rather than listing all crypto friendly banks in Panama, I’ll focus on one example, Tower Bank, and give you plenty of details. Before revealing all the amazing crypto friendly features Tower Bank offers, let’s step back and understand the banking context in Panama.

Panama is a major international banking power. Although Panama has a population of only 4M, you will find 79 unique banks! By comparison, Puerto Rico with a population of 3.2M, has only three. You might say Panamanian banking punches above its weight, just like the former Panamanian boxing champion, Roberto Duran. Look at the Panama City skyline on a video, and you will view dozens of bank logos on giant skyscrapers. Why is Panama a banking giant, you ask? Consider the following.

First, banking in Panama is tied to international trade and Panama Canal. Ships coming and going need financing as do countless logistics companies, freight forwarding, etc. Panama is also an important offshore banking center for wealthy South and Central American citizens, (and others) e.g., Venezuela, Colombia, Argentina, etc. looking to protect financial assets and diversify their banking. Third, Panama is a dollar-based economy, meaning their currency is the U.S. dollar. The U.S. dollar remains the world’s reserve currency, therefore currency risk is reduced. Banking safety entices customers. For instance, since 2000 there have been only three bank failures in Panama compared to hundreds in the USA. As you know, banking is a major driver of economic prosperity in Panama, consequently Panama has cultivated and nurtured talented bankers and regulators with plenty of high-level experience, regulatory stability, and excellent reputation. Last, Panama is a banking and finance innovator. Now we examine the next evolution of banking by highlighting a crypto friendly Panamanian bank, Tower Bank.

Tower Bank considers itself a bridge between two worlds–crypto and traditional banking. At Tower Bank, regardless of your nationality (so they say) you can open a bank account in dollars and crypto. (By the way, I’ll test their claim next month while in Panama.) According to Tower Bank, a client can:

  • quickly buy, sell, or convert stable coins, Bitcoin, and Ethereum (ETH) into dollars; or vice-versa
  • buy crypto currencies on numerous exchanges without commissions
  • make free crypto deposits/withdraws from any ATM in Panama

Tower Bank understands crypto fans demand greater autonomy over their assets and has responded with their Ikigii product.

Ikigii is the name of Tower Bank’s crypto wallet. With Ikigii, Tower Bank clients can buy and sell crypto; send and receive crypto, and execute banking transactions, including ACH, transfers, payments, etc. Using Ikigii, customers can send/receive crypto from their external wallets to their Ikigii wallet. With Ikigii, Tower customers can enjoy the best of both worlds. They can move their crypto assets on an external wallet (Ikigii) or maintain the assets at the bank!

Time to go but not before I leave you with this proverb from Panama where they say: “a tree that is born crooked will never straighten its trunk”.

Until Next Time,

Yogi Nelson