The NISHI Talk: Crypto Conversations "The 'True Decentralization' of DeFi and the Challenges of the Crypto Asset Industry" | Virtual NISHI x Yoshihiko Uchida

Summary

1. The Contradiction of "Full Decentralization"

A recent spate of hacking incidents has exposed a stark disconnect between DeFi’s public facade—where no single entity bears responsibility—and its operational reality. Given that end-beneficiaries ultimately exist, the sector is highly likely to transition toward formal regulatory oversight and supervision, driven by growing financial and economic security considerations.

2. US Legislative Progress and Implementation Barriers

While crypto-related bills are moving toward enactment in the US, much of the concrete institutional design and enforcement implementation has been deferred, meaning market uncertainty will not dissipate immediately. Furthermore, powerful lobbying from traditional finance and ethical debates within the administration continue to act as major friction points slowing legislative progress.

3. Challenges and Shifting Perspectives in the Japanese Market

For Japan to foster future growth, it is vital for regulators to rethink their approach and avoid stifling the seeds of innovation by over-regulating minute details. Additionally, major financial institutions must deepen their technical comprehension, reflect on their historically narrow perspectives, and adopt a proactive stance toward investment and strategic decision-making.

This project features Kasou NISHI, a prominent crypto analyst, engaging in candid discussions about trends in the cryptocurrency industry with individuals he feels are "important to interview right now." This time, through a dialogue with Yoshihiko Uchida, a professor at Shunan Public University and an expert in cryptocurrency regulations, the discussion delved into the "true decentralization" of DeFi in light of the recent series of hacking incidents and liquidity shocks, as well as US regulatory trends and challenges in the Japanese market.

Kasou NISHI: Recently, there have been a series of hacking incidents and liquidity shocks in DeFi. This has led to discussions about whether DeFi is truly decentralized. In particular, the numerous hacking incidents in April have sparked discussions about how to handle loss compensation and customer protection mechanisms. What are your thoughts on this, Professor Uchida?

Yoshihiko Uchida (hereinafter, Uchida): If DeFi were truly a completely automated system with no one held responsible, then the very idea of ​​loss compensation would be strange. However, in reality, when something goes wrong, there are movements to compensate and protect customers. This then raises the question of whether there are any decision-makers or beneficiaries involved.

Kasou NISHI: So, there's a discrepancy between the premise of "code is everything" and "no one is responsible," and the reality of its operation.

Uchida: Exactly. The idea that DeFi operators and those promoting DeFi could do whatever they wanted without regulation may have been detached from reality.

From the perspective of existing finance, if there are people who profit under normal circumstances and people who should bear some responsibility in emergencies, then it's a business that should be regulated.

Kasou NISHI: On the other hand, DeFi is non-custodial and location-free. The location of corporate registration is unclear, and it's difficult to know who is actually running it. Therefore, it's difficult to regulate it with existing laws.

Uchida: It is difficult. However, I think the trend of regulatory authorities in developed countries dismissing DeFi as "exempt from regulation because it's automated" will likely stop in the future. At the very least, if it functions similarly to finance and significantly impacts customer assets and market liquidity, it will likely be subject to some form of supervision and regulation.