Busan has been declared a “regulation-free” zone for blockchain development by South Korea’s national government, a move long expected but now formalized as part of a larger liberalization push.
Zug, Switzerland is said to be one of the models for the zone.
The Ministry of SMEs and Startups announced on July 24 that the second largest city in the country by population will host a wide range of blockchain offerings related to finance, public safety and tourism, though it stopped short of fully opening the market and allowing for international-level crypto initiatives, according to the Korea Herald.
A total of eleven regulations have been lifted for the project. It is expected that investors will move 29.9 billion won ($25 million) into the region by 2021 and development will be spread between the Munhyeon Innovation District, the Centum Innovation District and the Dongsam Innovation District.
BNK Busan Bank, a Korea Exchange-listed local institution, will supervise blockchain management as it relates to finance and might be developing a stablecoin pegged to the won.
Hyundai Pay is supporting payment solutions and advances in tourism. The company, which was established in 2016 by the CEO of Hyundai BS&C (also grandson of the founder of the Hyundai Group), signed a memorandum of understanding with the city in February in which it said it would move its headquarters to Busan and help it develop blockchain infrastructure utilizing the Hdac blockchain platform.
Other elements of the program include a public safety offering by Gyeonggi Province-based Coinplug, which claims to be Korea’s largest holder of blockchain patents. The development will include an app which allows citizens to video natural disasters and crimes and send the files to the appropriate authorities, complete with location information. A rewards system will encourage the use of the app. The next stage will involve a database that will allow for the storing and sharing of information.
BP&Solution, a Busan-based computer company, will work on blockchain as it relates to fisheries.
The region won’t be completely “regulation-free,” however. ICOs will not be allowed, and the project is still decidedly conservative in terms of cryptocurrency. The stablecoin envisioned will be highly limited in terms of its use. It will mainly be a component of a rewards system incentivizing participation in the other local blockchain offerings and will only be redeemable at certain establishments, making it more a voucher than a coin. Busan has explicitly said that the reforms are not designed to be cryptocurrency-related.
While the government move has been billed as an exemption from regulation, it is more a controlled experiment with certain defined goals and is evolutionary rather than revolutionary and fitting with Korea’s general and persistent suspicion of crypto.
The plan was initially mentioned in April, when Busan was reported to have won out over Jeju, a province already known for its relatively liberal policies. Jeju developed an ambitious and rather aggressive vision in 2018 to become a crypto island.
Busan has long been a center for trading and finance as well as a hub for innovation, and it is the home of the Korea Exchange. The city has been working for some time on blockchain-related developments, including the use of the technology at the port.
The recent designation of Busan as Korea’s blockchain capital is connected to a broad policy drive by Korea’s current administration. President Moon Jae-in has been promoting so-called regulatory sandboxes, which allow for the temporary suspension of rules so that new technologies and services can be tested outside the complex legal and bureaucratic environment in the country.
A goal of 100 such sandboxes was set for 2019, and as of mid July, 81 had been approved.
In line with the sandbox push, the government has named seven areas (cities and provinces) that will receive blanket sandbox privileges in certain technologies. South Jeolla Province, for example, will focus on e-mobility, Daegu on smart wellness and Sejong on autonomous driving.