Akimasa Yanagi: Old yet New Problems

2023/10/26

When writing papers on themes within my field of expertise, I begin to see commonalities in what I find interesting and why. To use an oxymoron, these are "old yet new" problems. I would like to highlight the following three here.

First is the issue of corporate governance. In "The Wealth of Nations" (1776), Adam Smith expressed early doubts regarding joint-stock companies. He argued that managers of such companies naturally become irresponsible because they handle other people's money (the shareholders'), while shareholders themselves become irresponsible by enjoying the privilege of limited liability. This problem of "double irresponsibility" between managers and shareholders remains a significant challenge in corporate law. However, now that funds and institutional investors have become the primary actors in capital markets, new governance challenges are emerging.

Second is the legal regulation surrounding crypto assets. When new products appear in the world, the question of whether they are subject to securities regulation often arises (recall the lawsuit between the SEC and Ripple). If subject to securities regulation, they fall under the supervision of regulatory authorities, increasing the burden on new businesses. What constitutes a security (an investment contract) is determined in light of the criteria set forth in SEC v. W. J. Howey (1946), known as the "Howey Test." In doing so, it is necessary to accurately grasp the essence of newly emerging crypto assets.

Third, crypto assets also serve as a catalyst for the creation of DAOs (Decentralized Autonomous Organizations), which are new types of decentralized business entities. Currently, DAOs do not possess complete autonomy and remain hybrid organizations that require human involvement. However, as technology advances further, fully autonomous organizations where algorithms and AI handle all decision-making and administrative tasks may emerge. Since the 19th century, the legal world has conceived of "legal persons" in addition to physical natural persons as entities to which rights and obligations can be attributed. Moving forward, we must consider how to legally position autonomous organizations embedded with AI, alongside animals and the natural environment.

As I delve deeper into these issues, I sometimes find myself needing to reread a text written 20 years before I purchased it 30 years ago when I started my research (a work written 50 years ago). My engagement with these "old yet new" problems is likely to continue.