While governments around the world are still grappling with how best to approach cryptocurrencies, an influential advisory commission in South Korea has outlined for domestic leadership how the Asian economic powerhouse can effectively bring crypto products into the mainstream.
That commission, the Presidential Committee on the Fourth Industrial Revolution (PCFIR), was created in 2017 to help the executive branch of the South Korean government understand and pave the way for the rise of new technologies and industries.
On January 6th, trade publication Business Korea confirmed that the PCFIR had formally advised the Office of the President on cryptocurrency products. The body argued that such assets couldn’t be ignored going forward.
“As of May 2019, daily crypto-asset trade hit more than 80 trillion won — about US$69 billion — in the world, so it is no longer possible to stop crypto-asset trade,” the commission said.
Several Notable Recommendations
In concluding that the crypto sector shouldn’t be overlooked, the PCFIR offered a series of recommendations regarding how the South Korean government could undertake strategies “for the institutionalization of cryptocurrencies” over a medium to long-term horizon.
For starters, the PCFIR recommended that key crypto industry jargon be clarified, namely by using the phrase “crypto asset” as an umbrella term to encompass other descriptions like “virtual currencies” and “cryptocurrencies.” The move comes at a time when the U.S. Congress is set to consider a similarly motivated initiative.
Moreover, the PCFIR advised the Korean government to allow bitcoin (BTC) to be listed for trading on Korea Exchange (KRX), the nation’s one and only securities exchange. If this particular policy proposal is carried out, the development would mark the first time bitcoin was directly listed on a major stock exchange to date.
If that happens, it would seemingly be only a matter of time before a trickle of other mainstream stock exchanges followed suit.
The PCFIR also asked the Korean government to allow Korean financial institutions to launch crypto-centric services and products, e.g. bitcoin futures offerings, “as the U.S. financial authorities did” in December 2017 when the country’s Commodity Futures Trading Commission (CFTC) became the first in the world to approve such derivatives.
In another nod to the U.S., the PCFIR said that Korea’s leadership should embrace the “business license” model for the regulation of crypto enterprises that currently reigns in places like America and Switzerland.
The commission lastly said the Korean government should back domestic crypto custody efforts so as to mitigate over-reliance on foreign innovation in the sector.
“Participants in the traditional capital market such as securities firms and banks should develop and introduce domestic custody solutions to handle crypto assets so that the Korean crypto-asset custody market will not depend on foreign countries,”
the advisory committee said.
Growing Attention at the Top
Last month, South Korea’s central bank, the Bank of Korea, noted in a “Monetary Policy for 2020” document that the institution was ramping up research around blockchain and cryptocurrency tech, among other things.
Around the same time, reporting broke that the bank was hiring digital currency experts to bolster its in-house research efforts. Yet the hiring spree didn’t mean a digital won project was in the works, if the institution was to be taken at its word.
“This hiring does not presuppose the possibility of issuing a [central bank digital currency],” a Bank of Korea official said in December.
Indeed, while the central bank may be building out the exact workforce needed for a CBDC, don’t necessarily expect a digital won any time soon. Back in the spring, the institution released a study that asserted CBDCs could negatively affect the liquidity of commercial banks. The bank could change its mind on the matter, but such a pivot may still remain a few years off.