South Korea’s Financial Innovation Bureau is formedJuly 21, 2018
The period of the last six to nine months in South Korea has been really dramatic for the crypto community, not just in the country, but internationally as well. As one of the biggest markets for the cryptocurrency trading and investment space, the nation has been instrumental in the development of the same field. It can be said that the growth bitcoin and many other cryptocurrencies showed in 2017 was directly fueled by this nation.
Today, however, the picture is quite different. Thanks to a range of sweeping regulatory actions, the activity in South Korea has been driven to a much lower point that before the crackdown. There were still plenty of companies active in the field, but the change was apparent. The same drop in crypto was clearly visible on the entire global market and naturally the reactions were not good.
But, as of now, the country has managed to create a regulatory body that will be focused exclusively on the cryptocurrency business entities. For some, this is great news and the final hurdle that has now been overcome to return to the old business activity levels for organizations like cryptocurrency exchanges. Others are fearful about the potential impact of this organization on the remaining crypto community in South Korea. Here is an analysis of what the same process could result in and how will that impact the market.
A New Government Regulation Agency
South Korea’s FSC or Financial Service Commission stated that it is creating a department that will be dedicated to blockchain and cryptocurrency. Its name is the Financial Innovation Bureau and it will define initiatives about policy making for fintech industry and domestic blockchain companies. The news was provided to the international community by the Korea Times and FSC corroborated it.
According to an official of the FSC, the bureau will be tasked with the domain of fintech innovation, including the use of new techs of big data mechanisms. It will also provide its opinions on the development and challenges of, as FSC states it, things like cryptocurrencies.
While all of this makes sense from a government perspective, one element is sticking out for many analysts. The body was designed with a defined lifespan. After two years, the body is scheduled to be dismantled and will stop working in this shape.
The decision to make the bureau temporary was, according to the reports, made during a meeting of the Ministry of the Interior and Safety and financial regulators. It was also suggested that FSC is planning, apparently in the same future period, to reshuffle the organization and find ways to better protect the consumers and the market. It will also seek to respond in a proactive manner to any financial invitations that are coming in the Fourth Industrial Revolution, as FSC stated.
The wording points to an interesting setup of double meaning and unclear end goals. While the FSC is setting up the bureau, it is also making a statement that in its current form, the organization is not adequate. For some, this is a way of lowering the expectation of the same new organization and providing a promise that better work will come from everyone in two years time.
In fintech, like in eSports and many other digital ventures, it is no surprise that organizations are kicking the can further down the road. However, the strange thing in this FSC decision is the fact that it is a full governmental body with a track record worth of an organized nation of South Korea. Why would then it establish this bureau only to limit its lifespan and state already that a reshuffle will take place in the near future in which it will cease to exist?
The Wider Context
Naturally, the decision of FSC is not taking place in a vacuum. Instead, it comes amid a rising level of effort that the country is placing into regulating the cryptocurrency and blockchain industry. This is in a period that came after a series of the announcement that shook the world of fintech.
One of the most noteworthy cases includes a moment of backtracking. In 2017, the country outlawed any ICOs on its territory. But, in May 2018, the legislative arm of the Seoul government asked for the ban to be removed and instead offered a legislative proposal. In it, the ICOs would be permitted if the investor protections are there to secure the rights and safety of consumers.
Earlier in July, it was reported that different political parties and their members are reading to submit a bill that deals with cryptocurrency regulation, but also initial coin offerings and blockchain tech. The main purpose would be to allow the new tools of fintech to successfully operate in the country, but also stop them from being used to launder money. The intent is also to provide the local exchange industry with improvements that would stop any malicious attacks like those seen recently.
The State of South Korea
In many ways on the issue of cryptocurrencies in all of their forms, the country and its political and governmental arms remain divided. The decision of the FSC perfectly illustrates the intent that shows them both wanting to do something about crypto and preferring not to do anything, to put it plainly. These half-measures are no surprise in any country in the world but the problem is that in South Korea, they come often with a force of action, like the ICO ban.
These leave the observer with a sense of cluelessness that dominates in the background – not so much in the sense of cryptocurrencies and how they function, but the actual direction the government wants to take. Instead, the fractions are going at each other, most likely in the form of battle between the pro-crypto and anti-crypto political and regulatory wings.
As this takes place, South Korea remains one of the key markets for not just bitcoin, but a range of other cryptocurrencies. Any instability in the country is immediately translated to the global markets and this is reason enough for everyone, both in and out of South Korea, to ask for both more internal alignment and more coherent plans from the Seoul government.