Attracting Foreign Investment: South Korea Pins Hope on Institutionalizing Cryptocurrency for the Fourth Industrial Revolution

The Fourth Industrial Revolution Committee in South Korea has suggested that the South Korean government should allow financial institutions to introduce products related to cryptocurrency, such as Bitcoin derivatives, as part of a medium- to long-term strategy to institutionalize the cryptocurrency system.

What is the Fourth Industrial Revolution?

In 2016, the World Economic Forum (WEF) introduced the term "Fourth Industrial Revolution." WEF founder Klaus Schwab explained that the Fourth Industrial Revolution is happening now and is growing at an exponential rate, bringing about changes in production, management, and governance systems through technologies such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3D printing, nanotechnology, biotechnology, and quantum computing.

The Credit Suisse Group in Switzerland proposed in its "White Paper on the Fourth Industrial Revolution" that "flexibility" will be the key to the success of the Fourth Industrial Revolution. Flexibility refers to the adaptability of a country to change, with countries having flexible labor markets, education systems, infrastructure, and legal frameworks being the most competitive in this revolution.

In May 2017, South Korea established the "Fourth Industrial Revolution Committee" and aims to achieve 460 trillion Korean won (approximately 12.6 trillion Taiwanese dollars) by 2030 through economic structural transformation.

Why is South Korea focusing on cryptocurrencies?

As digital finance continues to impact the financial industry, blockchain, distributed ledger technology, and cryptocurrencies are becoming increasingly popular keywords, and South Korea is determined not to fall behind in this blockchain race.

The committee recently recommended to the South Korean government to allow domestic financial companies to follow the example of U.S. financial institutions by issuing futures products based on Bitcoin prices. Additionally, the committee suggested that the financial sector develop and promote regulatory solutions to avoid complete reliance on foreign custodians when dealing with crypto assets.

According to a press release, the Fourth Industrial Revolution Committee released a document containing its policy recommendations, including the standardization of various terms such as cryptocurrencies and virtual currencies, listing Bitcoin directly on the Korea Exchange (KRX), and introducing Bitcoin derivatives and related policies.

The committee referenced the practices of U.S. and Swiss financial authorities and recommended that the South Korean government introduce business licenses or guidelines for cryptocurrency exchanges and integrate products related to cryptocurrencies into the financial system. The committee emphasized:

As of May 2019, the global daily trading volume of crypto assets exceeded 80 trillion Korean won (approximately 69 billion U.S. dollars), making it impossible to ban trading crypto assets.

The committee also suggested that the South Korean government allow financial institutions to handle crypto assets and encourage authorities to develop Korean regulatory technology. The committee added:

Traditional capital market participants, such as securities firms and banks, should develop and introduce domestic custodian solutions to handle crypto assets, so that Korea's crypto asset custodian market no longer relies on foreign entities. The South Korean government must gradually allow institutional investors to buy and sell crypto assets and promote over-the-counter (OTC) services specifically for institutional investor trading.

In fact, South Korea has been actively involved in blockchain technology, and a previous ABM report indicated that South Korea's largest telecommunications company, KT, will introduce a blockchain-based digital currency for Busan, one of the country's largest cities, which will be compatible with major banks such as Busan Bank and Hana Bank.

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