The South Korean government needs to come up with laws and systems related to blockchain technology and cryptocurrencies to encourage companies to invest in the blockchain industry, an industry report says.
The report, released by BC Card Digital Research Institute and KT Economics & Management Research Institute on Aug. 21, noted that blockchain’s limitations, such as lack of expandability and no support for Internet of Things (IoT) devices, will be overcome through technological progress, paving the way for various innovations in the trust-based sector, including public service, contract, authentication and financing.
Accordingly, many countries are revising legal systems to promote corporate investment in blockchain projects. Yet South Korea is slow in putting in place institutional arrangements for blockchain technology, hampering its propagation.
Kang Seung-joon, a senior researcher at National IT Industry Promotion Agency (NIPA) who authored the report, said South Korea is making slow progress in making institutional arrangements related to cryptocurrencies, while other countries are making rapid progress. The United States issues a license for cryptocurrency trading. The European Union (EU) has submitted a resolution to form a task force for cryptocurrencies and is studying plans to manage cryptocurrency transactions under the existing EU anti-money laundering systems.
China is also reviewing the issuance of its own digital currency and Singapore has come up with regulations on cryptocurrency exchanges. In addition, Japan has defined cryptocurrencies as a store of value that can be used in payment methods and has recognized them as actual currencies.
On the other hand, South Korea has made little improvement in related laws and systems. It has only added blockchain technology to the list of “new growth engine” technologies eligible for 40 percent tax credit for research and development (R&D) costs.
The report predicted that blockchain would be extensively applied to various areas in the future. In the banking sector, in particular, not only money but also all conceivable assets, such as bonds, stocks, derivatives, insurance, testaments and lottery tickets, will be recorded in blockchain and be used as objects for smart contracts. Furthermore, in the non-banking sector, blockchain technology is likely to be used for sharing patient data, authentication of certificates and tracking agricultural and marine products.
The report said, “As blockchain is expected to have big economic and social ripple effects, the government needs to ensure its development through applications to the existing industries. The government and related agencies should set up new laws and systems for blockchain technology to revitalize the fintech sector.”