[THE INVESTOR] Even after the Korean government rolled out a series of measures to cool down the heated cryptocurrency market earlier this year, there have been numerous blockchain-related conferences and meetups, proving that country continue to be the centerpiece of this emerging technology.
But some believe that although the blockchain and cryptocurrency industry is Korea’s next big thing, time is running out and they are urging the government to allow initial coin offerings and develop a local Crypto Valley like Zug, Switzerland.
Two recent seminars at the National Assembly on Aug. 29-30 gathered blockchain experts who pushed forth these ideas.
“ICOs are a very important part of blockchain technology so banning them would destroy the ecosystem of blockchain and cryptocurrencies,” said Oh Jung-gun, president of Korea Finance ICT Convergence Association. “This will further delay the development of the fourth industrial revolution.”
It may be recalled that Korea announced a complete ban on all types of ICOs in September last year.
Oh estimated that more than 100 blockchain companies had to go abroad for their ICOs. For instance, some of the notable projects such as Boscoin, ICON and Hdac went to Zug, Switzerland, to carry on their coin offerings. MediBlock and Zikto too are preparing for a token offering abroad.
Drain of national wealth?
“Blockchain projects led by Koreans led the most valuable offerings in the second quarter this year but they had to do it overseas,” said Kwon O-hoon, partner of Okims Law and Co. “This is a serious drain of national wealth because they have to incur a lot of expenses such as for consulting and legal fees and taxes there when they could have spent the money in Korea. They also have to take their technologies abroad.”
By setting up a business entity in a foreign country, they create jobs there and Korea is losing on those benefits, he noted.
Crypto Valley in Korea
To allow ICOs, legal experts suggest instead of a separate legislation, the government should find a way to work within the current legal framework.
“I think we should be careful in drafting a new legislation on blockchain. The industry is changing rapidly and once the law is promulgated, it will be difficult to make changes,” said Ha Tae-hyung, senior advisor to local law firm Yulchon, adding that the experiment could be done in a specially designated place.
“The government has been quite pessimistic about ICOs and it won’t be really easy for it to change its stance suddenly. But if we allow a special zone for blockchain industry, it would be less burdensome,” said Yoon Jong-soo, partner at Lee&Ko law firm. “At the same time, the government could gather data and experience from Crypto Valley to see what works and what doesn’t.”
Currently, many local governments such as Jeju Special Self-governing Province, Daegu and Busan are pushing the idea of Korea’s own Crypto Valley. Among them, Jeju Gov. Won Hee-ryong said earlier this month that he wants to make “Jeju Province the model of blockchain hub just like Zug, Malta and Singapore.”
A view of Jeju City
While many experts are pushing the idea of allowing ICOs and setting up a Crypto Valley in Korea, the government is taking a cautious approach.
“There are some countries that have banned ICOs and others that offer guidelines. It’s interesting to see that the countries that publish most papers regarding blockchain technology are China, the US and UK,” said Ahn Chang-kuk, head of capital markets division at Financial Services Commission, refuting that banning ICOs does not necessarily hinder the development of blockchain technologies.
China also completely bans ICOs while the US actively enforces suspension orders and fines those who violate the law.
“We need to think about whether or not countries like Switzerland and Singapore allow ICOs by their own people,” Ahn said.
Lee Jae-hyung, head of Convergence of New Industry at the Ministry of Science and ICT, took a cautious approach on allowing ICOs in the country. “The biggest concern for the government is investor protection. A lot of ICOs have turned out to be scams, according to overseas reports. Because of this, not only the Korean government but also other countries have not been able to come up with clear regulations,” he said.
But experts said curbing an emerging industry just because of concerns over side effects is absurd and might contribute to increasing the negative impact. They also emphasized that making it more open would make the industry more transparent and minimize side effects.
“There is information asymmetry because the market is closed and that’s why there are a lot of scams,” said Lee Seung-myung, co-founder and CSO at Streami, operator of local cryptocurrency exchange GOPAX.
“The government should not and cannot take the responsibilities of investors. The problem with ICOs is that investors have little knowledge of how to invest in an ICO. So we need more education,” said Kim Tae-hyun, an ICO advisor.
By Park Ga-young (email@example.com)