The Future of Financial Systems in the Digital Age: Perspectives from Europe and Japan (Perspectives in Law, Business and Innovation)

Preface
Contents
Editors and Contributors
	About the Editors
	Contributors
Abbreviations
List of Figures
List of Tables
Financial Systems in the Digital Age: Perspectives from Europe and Japan
	1 Motivation and Background
	2 Financial Systems: Functions, Resources, and Design
	3 Japan and the Euro Zone
		3.1 Basic Economic Data
		3.2 Financial Systems
		3.3 Digitalization
	4 DX and Finance: An Extended Overview
		4.1 The Informational Nature of Finance
		4.2 Infrastructures
		4.3 Knowledge Base
		4.4 Trust
		4.5 Legislation and Regulatory Oversight
		4.6 Impact on Design
	5 Concluding Remarks
	References
The Future of Japan’s Financial Market
	1 Introduction
	2 Influence of ICT Development on Financial Transactions
		2.1 Transaction Costs and Financial Transactions
		2.2 The Unceasing Development of ICT
	3 Financial Transactions and Financial Legislation
		3.1 Grand Design of Financial Legislation
		3.2 Peculiarities of Japan’s Financial Legislation
	4 Innovation of Financial Services Caused by ICT Developments
		4.1 Innovation of Financial Services
		4.2 Development of Financial Services in Japan
	5 Recent Developments of Financial Markets
		5.1 Recent Innovations in Financial Markets
		5.2 Change of the Role of Financial Market Infrastructures
	6 Challenges for Japan’s Financial Legislation
		6.1 Adjustment of Financial Legislation in Response to Advancements in ICT
		6.2 Legal Foundation of the Collective Clearing System
		6.3 Challenges for Japan’s Financial Legislation
	7 Closing Remarks
	References
Financial Digitalization and Regulatory Challenges for Japan
	1 Introduction
	2 The Five Ds
	3 Regulatory Responses and Challenges
		3.1 Visions Guiding the Regulatory Response to Financial Digitalization
	4 New Issues Under COVID-19
		4.1 Acceleration of DX
		4.2 The Three Ss
		4.3 Role of the Financial Sector and Financial Digitalization
	References
Digital Currencies and the Future of Money
	1 The Modern Monetary System
		1.1 Brief History of the Modern Monetary System
		1.2 Benefits and Advantages of the Modern Monetary System
	2 Digital Innovation and Challenges to the Modern Monetary System
		2.1 Digital Innovation and the Monetary System
		2.2 New Challenges to the Modern Monetary System
		2.3 Central Bank Digital Currencies
	3 The Potential of Digital Currencies Issued by Private Entities
		3.1 Issues to Be Resolved in Japan’s Payment Infrastructure
		3.2 The Concept of “Private-Led” and “Two-Layered” Digital Currency
		3.3 The Digital Currency Forum
	4 Digital Currency and the Future of the Monetary System
		4.1 Challenges to the Modern Monetary System Triggered by Digital Innovation
		4.2 The Monetary System and Nation States
		4.3 The Monetary System and the Two-Tiered Structure
		4.4 Competition Among Currencies
		4.5 Public and Private Initiatives to Shape the Future of the Monetary System
	5 Outlook
	References
Central Bank Digital Currencies in a World with Negative Nominal Interest Rates
	1 Introduction
	2 The Risk of Structural and Cyclical Bank Disintermediation Through CBDC
		2.1 Effects on Bank Funding Costs of CBDC2
		2.2 Increase of Banks’ Reliance on Central Bank Credit, Collateral Constraints, and Credit Centralization?
		2.3 Bank Runs and Cyclical Bank Disintermediation Through CBDC
	3 NIRP and CBDC
	4 A Two-Tier Remuneration System for CBDC
	5 Conclusion
	References
The Future of Payments in a DLT-Based European Economy: A Roadmap
	1 Introduction
	2 Design Paradigms for a Future Payment Infrastructure
		2.1 Account-Based Versus Token-Based Solutions
		2.2 Contract Execution, Digital Payment Infrastructure, and Monetary Unit
	3 Euro-Denominated Payment Solutions for DLT-Based Smart Contracts
		3.1 Account-Based Solutions
		3.2 Token-Based Solutions
	4 Roadmap
		4.1 Time to Market for Different Payment Solutions
		4.2 Fungibility and Interoperability
		4.3 Time to Market and Use Cases for Private- and Public-Sector Solutions of the Digital Euro
		4.4 Interoperability and Efficiency
	5 Conclusion
	Appendix: Use Cases for the Digital Euro
	References
Digitalization of Payment Instruments: Cashless Payments and Loyalty Points Systems
	1 Introduction
	2 Cashless Payments in Japan: Current Situation and Prospects
		2.1 Why is Japan Encouraging Cashless Payments?
		2.2 Government Indicators and the Current State of the Cashless Economy
		2.3 Why Are Cashless Payments Slow to Gain Traction?
		2.4 Japan Remains a Cash-Oriented Society
		2.5 We Need to Understand How Consumers Use Cashless Payments
		2.6 Areas of Competition and Cooperation for Private Companies
		2.7 Can a Loyalty Points System Boost the Spread of Cashless Payments?
	3 Prevalence and Nature of Digital Points Systems
		3.1 Are Loyalty Points Japan’s Corporate Pseudo-currency?
		3.2 The Scale of Loyalty Points Systems
		3.3 The Incomplete Function of Loyalty Points as Currency
		3.4 How Platform Companies Turned Loyalty Points into a Pseudo-currency
		3.5 Fun Features Differentiating Loyalty Points from “Money”
		3.6 Latent Regulatory Issues
	4 The Future of Cashless Payments and Digital Points Systems
	References
The Changing Landscape of Retail Banking and the Future of Digital Banking
	1 Introduction
	2 Retail Banking from Past to Present
	3 Digital Transformation in Banking
	4 The Future of Banking
		4.1 The Future of Banking is Digital
		4.2 Three Stages of Evolution
		4.3 Present and Future Developments in Value Chains
	5 The Changing Landscape: Where Do Banks and Fintechs Stand in the Market?
		5.1 Four Strategies to Counter Fintechs
		5.2 The Bank–Fintech Relationship: The Other Side of the Coin
		5.3 How Are Banks Responding to the Changing Game?
	6 Outlook
	References
High-Frequency Trading in Japan: A Unique Evolution
	1 Introduction
		1.1 Is High-Frequency Trading Fintech?
		1.2 Recognizing the Social Significance of HFT
		1.3 The Movement Toward Greater Regulation of HFT Around the World
		1.4 HFT May Play a Role in Shaping Business Models in Japan\'s Securities Industry
	2 Algorithmic Trading and HFT
		2.1 Algorithmic Trading
		2.2 Types of Algorithmic Trading
		2.3 Using Machine Learning in Algorithm Construction
		2.4 The Struggle Between AI Technologies
		2.5 What is HFT?
		2.6 Background to the Growth of HFT for Arbitrage in the US
		2.7 Will HFT Approach the Speed of Light?
	3 Reviewing the Historical Development of HFT in Japan and Around the World
		3.1 HFT First Flourished in the US
		3.2 HFT Firms Move to Japan from Saturated Markets Such as the US
		3.3 Activities of HFT Firms in Japan’s Highly Concentrated Market
		3.4 The Domination of the Japanese Market by Foreign HFT Firms
	4 Evaluation of the Impact of HFT on Financial Markets
		4.1 HFT Effectively Enhances Market Functioning
		4.2 Empirical Research Overseas on the Effect of HFT on Market Performance
		4.3 Results of Research in Japan
		4.4 The Possibility That HFT May Destabilize Markets
		4.5 Conflicting Opinions on Whether HFT Amplifies Market Disruption
		4.6 The Issue of Fairness in Trading
	5 HFT Regulation as a Preventive Measure
		5.1 HFT Regulation and System Response in the US
		5.2 HFT Regulation in Europe
		5.3 HFT Regulation in Japan
		5.4 Few Cases of HFT Unfair Trading Have Been Exposed in Japan
	6 HFT and the Securities Sector in Japan Today
		6.1 Japanese Securities Companies Delayed the Introduction of Practices from the US
		6.2 Smart Order Routing and Order Book Information
		6.3 The Emergence of Japan’s Flash Boys?
		6.4 The Movement to Introduce Payment for Order Flow in Japan
		6.5 Information on Orders by Individual Investors is Valuable for HFT Firms
		6.6 Against the Backdrop of Commission-Free Trading
		6.7 Are the Interests of Individual Investors Being Protected?
		6.8 Research on HFT is Still in Its Infancy
	References
Index