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South Korea has done a crypto pivot. Regulators announced today that the Financial Services Commission (FSC) is establishing a policymaking body to lead the country’s efforts in the Fourth Industrial Revolution era, commonly characterized as the emergence of robotics, artificial intelligence, blockchain, biotech, nanotech, quantum computing and the Internet of Things. The newly-created Financial Innovation Bureau will focus on blockchain, cryptocurrency and fintech.
The decision was made during an FSC cabinet meeting with the Ministry of the Interior and Safety.
The FSC plans a major organizational reshuffle to “better protect financial consumers and proactively respond to financial innovation,” according to a statement by the FSC. “The new Financial Innovation Bureau will be tasked with policy initiatives for financial innovation – e.g. innovative financial services using fintech or big data and responses to new developments and challenges such as cryptocurrencies.”
The proactive response is widely regarded as a major positive step toward regulating, and not stifling, cryptocurrency innovations.
In January, 228,295 citizens petitioned the government over regulations banning ICOs and forcing investors to verify their identity to trade crypto on virtual accounts opened at local banks. The people demanded to know why regulators wanted to restrict certain crypto-related activities – crushing their dreams of a happier life.
The large number of petitioners legally compelled the government to respond. The blowback set into motion a rigorous debate about government oversight in the crypto space.
Subsequent events made it difficult to impose a comprehensive ban on cryptocurrencies.
January – It was revealed that the South Korean National Pension Fund made indirect investments in four cryptocurrency exchanges – Korbit, Upbit, Coinplug, and Bithumb – totaling 2.6 billion won, making a proposed comprehensive ban on cryptocurrencies impractical.
March – Bithumb, Korea’s largest cryptocurrency exchange, announced a breakthrough platform that will allow 6,000 physical stores across the country to sell a variety of products, including meals, for cryptocurrency. The platform, which is set to launch at the end of the year, is a joint venture with mobile payment operator and gift-card platform Korea Pay’s Service.
May – South Korea’s Supreme Court officially proclaimed that Bitcoin is an ‘asset with measurable value.’
The government has been working to come up with a regulatory framework that can advance cryptocurrencies and spur innovation while protecting consumers. As a global movement in a global economy, regulators in every country risk ending up in last place in the race for technological supremacy by imposing any heavy-handed actions to eliminate cryptocurrencies. Because of their decentralized nature and accessibility through the internet, they cannot be shut down.
It’s also hard to separate blockchain from cryptocurrencies. Many tech experts, financial analysts and admired investors have spoken fondly of blockchain while condemning cryptocurrencies, but the distinction between the two is difficult to reflect in policymaking since blockchain technology is what underpins cryptocurrencies and because cryptocurrencies are often the underlying instrument that fuel innovative blockchains. The two are commonly and inextricably linked.
The new Financial Innovation Bureau will take a holistic approach to integrating cryptocurrencies and blockchain. The bureau will coordinate three divisions: the Financial Innovation Division, the Electronic Finance Division and the Financial Data Policy Division.
According to a study released in December 2017, one third of South Korean professionals are invested in cryptocurrencies such as Bitcoin, making South Korea one the biggest cryptocurrency markets in the world.
