The financial watchdog of South Korea unleashed a digital currency team with the goal of introducing new rules governing exchanges during the early part of 2017. The Financial Services Commission (FSC) assembled members of the working group and scheduled inquiries within the next few months. Members of this task force include representatives from other government agencies. These are the Financial Supervisory Service and Ministry of Strategy and Finance as well as the Bank of Korea, the country’s monetary authority.
Issues for Discussion
FSC spokespersons said among urgent matters to be taken up include possible approaches similar to the Bit License Proposal of New York and recent regulatory moves of Japan. Another model is regulation being enforced in the European Union (EU). The supervisory body also mentioned blind spots in regulation as likely drivers for action, money laundering and tax evasion hazards.
This move came after the financial sector of South Korea started to engage in Blockchain technology specifically in the field of remittances. Last month, Bitcoin start-up enterprise Coinplug Korea announced it partnered with the country’s biggest credit card provider for a new identity solution that powers the technology. South Korea’s only securities exchange disclosed it will open a private marketplace based on Blockchain.
Coinplug Korea is a Bitcoin wallet, exchange, as well as processor of card payments which targets the broad Asian market. Coinplug also offers a two-way Automated Teller Machine (ATM) and Bitcoin gift card known as OKBitcard. This is available in local supermarkets. Meanwhile, New York State Department of Finance released a modified version of its Bit License Proposal which the FSC is monitoring closely.
South Korea’s Ministry of Science, ICT and Future Planning manages registration of Bitcoin exchanges without regulatory guidelines. The existing structure will most possibly change by the first quarter of 2017. With regards to regulation concerns, the task force will consider current legal structures in the United States (Bit License Proposal of New York as mentioned earlier) as well as Japan wherein the National Diet (Japan’s Bicameral legislature) passed a recent measure to control Bitcoin exchanges in their country.
Last month, FSC chairman Yim Jong-yong declared that South Korea will promote the classification of crypto-currencies on a wide scale in conjunction with international trends in the United States, Japan and other leading nations.
Adoption of Bitcoin
The acceptance of Bitcoin has witnessed considerable progress in South Korea lately. Around $US1.3 billion of 1.5 trillion SK Won worth of transactions were processed among the first three Bitcoin exchanges operating in the country. FSC data also revealed a six percent growth in average monthly transactions of Bitcoin compared to 2015. Strict regulation is seen as a way of preventing mishandling or wrong use of any digital currency through exchanges. Crypto-currencies are frequently used for money-laundering activities, drug-trafficking and tax-related felonies because these are not covered by regulation.
Increasing activities related to regulation coincide with developments in the FINTECH sector of South Korea. One example is the decision of the Korea Exchange to launch the Blockchain-based market for start-up firms and private corporations with regards to trading of shares. On the other hand, a leading financial entity (Shinhan Bank) stated that a new remittance service (Bitcoin-based) will be serving the Korea-China corridor. This is a case in which a traditional commercial bank is taking advantage of Bitcoin innovation.
Shinhan Bank and Blockchain Start-up Streami
Shinhan Bank and Blockchain Remittance Start-up Company Streami will launch a Bitcoin remittance platform in South Korea. This local banking institution is the first in the region to use the Bitcoin platform. Streami is a Blockchain payment/transmittal middleware and infrastructure provider that guarantees safe and inexpensive trans-border payments. Shinhan Bank supported Streami in its investment programs in 2015. The bank pledged around $US427, 000 to the start-up’s funding cycle. Streami acquired a $US2 million seed fund.
Blockchain remittance can save on substantial costs as well as facilitate full transparency for clients. Besides, this network is certified secure compared to the traditional remittance companies. The digital ledger payment system of Streami is backed up by the Information Technology Company Shinhan Data Systems, a subsidiary of Shinhan Bank.
The partners are looking forward to launch their Blockchain service next month. However, both companies expect government authorities to permit and regulate digital currencies only in 2017. Bitcoin is not regarded legal currency in South Korea until now. Shinhan Bank and Streami are convinced this Southeast Asian nation is a productive environment for the Blockchain technology. The country has more than 800, 000 foreign workers. This translates to 840 transactions or $US4.4 billion every year.
Developing Hub for FINTECH Start-ups
South Korea is emerging as an ideal facility for new players in the financial technology industry along with legacy entities. Aside from this partnership, there are also other start-ups that compete in this region. One is Korbit and its Hyphen Project which enables payouts between 24 countries. It charges one percent fee for each transfer. Korbit offers affordable crypto-currency remittances. The company has support from Softbank Ventures (Korea), Digital Currency Group and Pantera Capital.
The remittance service project of Shinhan Bank and Streami will turn out as the first-ever platform supported by a legacy financial institution rooted in Korea. The application will be fully compliant with anti-money laundering legislation. At the same time, it will employ fraud detection, sanction-screening, and submission of raw information required by regulators. From South Korea, Streami is planning to expand across Asia and target countries such as The Philippines, Singapore and Thailand.
Crypto-Currency Breeding Ground
Overall, South Korea is emerging as a focal point or nucleus for Blockchain and digital currencies particularly the Bitcoin. The decision of the bureaucracy to regulate Bitcoin starting next year is a step in the right direction for this new technology. Both Bitcoin and Altcoin are now popular in this country. South Korea is also focusing on the development of the FINTECH sector. The government will also schedule releases amounting to $US2.65 billion within the next three years for financial technology ventures. Indeed, this is positive sign that FINTECH and Blockchain will progress continuously.