South Korea stands as one of the forefront Asian nations driving the adoption of the blockchain and cryptocurrency. This spans from the use of blockchain to develop assets such as currencies, and for STOs (Security Token Offerings). On February 6th, 2023, the country also released a formal guideline on how blockchain-based assets will be developed and regulated.
In addition to the guidelines given, Shinhan Securities Ltd, one of the largest securities firms in South Korea, announced its Security Token Offerings team, a group set up to help drive the research, development, and use of security tokens.
Shinhan Securities is part of the Shinhan Financial Group that’s a partner with Polymesh (an organization focused on developing permissioned blockchain-based solutions for institutions around the world).
South Korea’s ban on crypto
As early as 2017, firms like Samsung in South Korea, have shown interest in exploring the blockchain with keen attention on Ethereum. However, in the same year, for the first time, South Korea’s Financial Services Commission (FSC) placed a ban on initial coin offerings (ICOs) in the country.
The FSC stated that the decision was taken to help curb fraudulent activities by organizations and individuals as well as to protect consumers from illicit activities related to crypto. While there were considerations to allow institutional investors access into the banned area before the end of 2017, the decision was not enacted fully.
The following year, another announcement to ban all crypto exchanges was made by the nation’s Minister of Justice. Although the decision was not comprehensively backed by the government, FSC took another step to restrict minors from participating in crypto-related activities and foreigners from using accounts in the nation to engage in crypto trading.
Adjustments to develop the digital economy
Despite the negative outlook on crypto in South Korea, in 2019, the town of Busan was declared a regulatory-free zone for blockchain technology. With the declaration came the advancement in the development of several blockchain-based applications for individual and business use cases.
Today, Busan is a crypto and blockchain hub in South Korea and has announced plans to launch a native crypto exchange. Although the initial strategy to have Binance and Huobi as partners were dropped, the project is still in view.
In 2022, the Bank of Korea hinted that it was considering lifting the ban on issuing ICOs. In spite of no clear revocation of the ban, financial firms in the country have resorted to releasing ICOs in other nations which are then sold in South Korea.
Other steps taken in the nation to support the development of digital assets include the creation of self-regulatory systems by the Korea Blockchain Association, the development of the legislative framework for crypto by the FSC, the announcement of the launch of a virtual currency tracking system by the Ministry of Justice, and possible enactment of the DABA (Digital Asset Basic Act).
The role of Shinhan Financial Group
The Shinhan Group has also played a huge role in promoting the use of digital assets in South Korea. Shinhan Bank, which is under the Shinhan Group, became the first bank in South Korea to release publicly used decentralized identity (DID) services for the financial sector in partnership with ICONLOOP in 2020.
The bank also made $660,000 from crypto transaction fees in 2021 while offering crypto-fiat on-ramp services with the Korbit exchange. It is also a huge investor in Korea Digital Asset Custody Co. (KDAC), a tech firm that creates digital asset custody products and services. Shinhan Bank wants to also release stablecoins for public use.
South Korea is looking beyond creating and using cryptocurrencies to develop infrastructure for the metaverse as well. The county planned to spend $177 million to develop its metaverse industry. As more Koreans use NFTs, their importance is being explored in the virtual world.
South Korea has a keen interest in the future of the global economy which has a lot to do with digital currencies and their implementation.