In South Korea, the popularity of digital assets and technology of the distributed registry is rapidly gaining momentum. While the national postal service appealed to the heads of the investment Bank Goldman Sachs, so that they could share knowledge and skills in the field of virtual money, the Federation of Korean banks is the commercial banks system of verifying the identity of citizens using the platform authentication BankSign on the basis of the DLT from Samsung SDS.
Innovative technologies are interested not only the business but also the public sector. The investment Advisor to JPM Asset Management Harris shim notes that: “the country has created the Ministry of startups small and medium businesses and the Committee for the fourth industrial revolution, whose direct responsibilities include the development of the digital economy.”
In 2019, the government plans to allocate $4.4 billion to development of the IT sector, including DLT and artificial intelligence (AI), in the framework of the investment program until 2023. It is expected that the initiative will speed up the process of modernization of the economy and increase the number of qualified IT-specialists and reduce the overall level of unemployment, which in August reached its highest level since 2010 is 4.2%. While the percentage of unemployed youth was 9.2%.
The concern of the government of South Korea by the issue of employment is clear. The country is in 14th place in the total number of unemployed, which in August exceeded 1 million people. While the number of employed persons fell by 12 thousand to 26,721 million people. Such weak statistics undermine the credibility of the economic program of President moon Jae-In, a approval rating which last week for the first time since the elections fell below 50%.
The first six-month training course distributed registry is already running Korean public institutions, the Ministry of science and technology and the Korean standards Association (KSA) in cooperation with the Hong Kong startup Waltonchain. The organizers have allocated $90 million to education 42 course participants. The project will help graduates to find a job, support the organization of startups and as a whole will lay the Foundation for a healthy DLT-ecosystems.
Moreover, in November we are arranging a hackathon, the members of which should offer new designs and options for the use of a distributed database. Growing demand for IT-specialists notes, and a Committee member of the conference Blockchain Seoul 2018 Goodin Sophia CHOI:“maintenance and software development underpinning the everyday activities of new disruptive companies, requires special knowledge. Technology in the digital domain is evolving faster than the engineers have time to learn how to develop them. Thus, there are not enough people with the necessary skills to fill the growing number of vacancies”.
Seriously the implementation of the digital financial system attended a small Korean regions such as the province of Gyeongsangbuk-Do, with the aim to revive the local economy. Now operating in several districts of the province, gift certificates, secured Fiat money is planned to be replaced by virtual currency. Residents will be able to carry out transactions with the asset by scanning the QR code, and traders to conduct transactions on new digital platform.
The launch of the virtual currency will help to reduce costs of the local budget to issue certificates January 2017 were sold by the authorities for a total of $90 million Money transfers will be recorded in the public registry, and a confirmation of the transaction will be smart receipts. Lady CHOI adds that a significant portion of the population in the small provinces are elderly people who are faced with the problem of a limited number of Bank branches. Digital currency will help them avoid burdensome trips to remote banks.
In addition, small regions have to contend with a high rate of Exodus of young people caused by the lack of creative regional cultural content. Young people leave home for a better work and life, which leads to labor shortage, the aging of society and, as a result of the economic crisis. Application of technology is a decentralized database will allow its users to create and store innovative ideas and share them, and the virtual currency will be the means of sending and obtaining this important information.
Another province, Jeju-si, also promotes the idea of digitalization of its economy, requesting the government the status of a technology hub for the global DLT. Island with a high degree of administrative autonomy is clearly trying to compete with Malta is another island that has become one of the world’s digital centers. Province Governor Won Hee-Ryong says that it is necessary to develop international standards and rules of circulation of electronic coins in accordance with which local and foreign IT-companies could do business in the region. Securing for the island the status of digital valley would create more than 1,600 jobs, would give the development of the infrastructure of the province and joined the local budget project tax deductions. The representative of the consulting company wealth management, specializing in DLT, Channy LIM notices that: “If the island will be able to win approval for the initiative from the Korean government, this will be a turning point for the entire Korean digital economy”.
The chances of implementing the idea of the island do exist. In late August, lawmakers returned to the issue of legalization of supply of digital coins, the ban on acting in the fall of 2017. The main argument “for” may be the obtaining tax revenue from innovative projects that would reduce the state budget deficit. In June 2018, this figure amounted to 3 520 billion won — more than $3 billion.
The Korean major and the fifth in the world of digital exchange Bithumb with a daily turnover of over $376 million (according to Coinmarketcap on 14 September) in mid-April paid for another tax bill for $28 million at the same time in April, the exchange announced its desire to issue its own coins Bithumb Coin and make it a primary placement in Singapore because of the illegality of such an operation in their country. For exchange this is another opportunity to earn extra income from liquid asset, which can be a coin if the exchange will put it in pair with other virtual currencies and create the necessary infrastructure. So, in 2017 net profit of the company amounted to 427,2 billion Korean won, surpassing the 2016 171 times.
By the time of this writing, the exchange has not released the coin, but if it is still made in another country, that can only intensify the Domino effect that has already been observed in the Korean market, when digital projects go abroad and conduct a primary sale of virtual assets there. For example, Korean DLT project ICON did not wait for policy changes to regulators, and it floated its currency ICX in Switzerland, collecting more than $42 million If we assume that the primary range of coins is subject to corporate tax, which amounted to 22% in 2017 (year end sale iCX), the Korean budget has missed about $9 million Child project of Hyundai Group, Hdac BS&C also went to Switzerland to place their virtual currency, which has managed to raise $20 million More than $4 million also passed Korean budget.
Such a great shortage cannot leave the Korean government. Back in the spring, the National Assembly called for the legalization of primary distribution of coins. The initiative was supported by the Committee for the fourth industrial revolution, recommending the authorities to form a task force of private investors and government officials to increase the transparency of the market digital assets.
A final decision from the government is only expected, and his sentencing is delayed for several reasons. First, in the country the virtual currency still has not received a legal definition. 30 may as part of the trial, the Supreme Court of South Korea ruled to confiscate 191 bitcoin from cyber criminals. This could mean that in criminal cases the digital assets may be treated as property with value. This is the first step in determining the status of electronic money in the country.
Secondly, the registration system proposals for the placement of the virtual currency requires a detailed study with the aim to reduce the risk of fraudulent schemes. Ponzi schemes are widespread in Asia, including in South Korea. So, on the 19th of April, the South Korean court of the city of Incheon has convicted two persons, who organized the bitcoin pyramid. The criminals have registered a company in the Philippines and has awarded more than $24 million of investments of investors, promising them enormous profits. Therefore, the security of investors and their protection from pyramid schemes are a priority for the chief financial regulator of South Korea — financial services Commission (FSC). To solve Korea could follow in the footsteps of the US model, where projects for investment through the deployment of virtual currencies must be SEC accredited and undergo regular audits.
It should be emphasized that the authorities are already active in the fight against other types of fraud, hacker attacks on digital exchange, is tightening rules for compliance, KYC (“know your customer”). When registering on the exchanges, investors need to provide real data that coincide with those specified for the Bank accounts. Already registered traders to continue trading at the stock exchanges are also obliged to provide valid information. All anonymous accounts fall under the lock. In addition, FSC has issued guidance to exchanges on the fight against money laundering. Investors carrying out transactions in more than 10 million won per day or 20 million won during the week, should fall under suspicion and be verified by the exchanges.
On 11 September it became known that the KYC rules must be respected not only exchanges, but also the banking sector. Banks are required to limit or completely suspend service to clients, not providing full information about their accounts in digital currency.
The South Korean stock exchange had been subjected to break-ins. Particularly hot was June, when hackers managed to steal digital assets for a total amount of $71 million — first $40 million by cracking Coinrail, and then $31 million from the giant Bithumb. The global statistics are impressive: in the first half of 2018 had stolen $1.1 billion.
And finally, the most important question — the question of taxation remains open. Authorities still have not provided the tax legislation for the market of digital assets. According to the anonymous source of The Korea Times from the government, discusses the various options for the introduction of VAT or tax on capital gains or both to trade electronic currency, and collecting corporate income tax from the exchanges. He adds that: “Legalization of primary supply of coins is possible with the involvement of local banks, ministries of justice and Finance and tax Agency, whose participation will increase the level of transparency of the process. This will allow the government to track the history of capital inflows to the projects.” Perhaps we’ll get some new information on this issue at the upcoming summit in Seoul.
While we wait, I want to say that despite the rather aggressive attitude of regulators to market a digital asset, South Korea has shown great interest in new technologies and develops options for their use for the solution of existing economic problems.