South Korea Archives

Bank of Korea’s paper says cryptocurrencies and Fiat can develop symbiotic relationship

Posted on April 27, 2017 | by [email protected]

South Korea’s Bitcoin adoption has been on the rise ever since Chinese exchanges stopped withdrawals. While Japan has truly eaten into the Chinese trading volumes, South Korea has secured the fifth spot in terms of trading currencies by volume. The central bank and the financial legislative committee of South Korea have decided to not only adopt cryptocurrencies but also launch a cryptocurrency of their own. While the country is taking a positive yet cautious approach towards digital currencies, they are diverting the good amount of effort in studying them in detail. The result of such research is the recent paper by the Central Bank of Korea that predicts how cryptocurrencies and Fiat currencies would go on to develop a symbiotic relationship. Let’s look into the details of the paper and how they are proposing this would happen:

How cryptocurrencies would be sought after:

Cryptocurrency Art Gallery by Namecoin via Attribution Engine. Licensed under CC BY.

The working draft submitted by the researchers from the Bank of Korea and Seoul’s Hongik University aims to identify factors that could drive the use of a blockchain-based currency over a government-issued one. The paper clearly highlights the cost-effectiveness of cryptocurrencies and point out that it would turn out to be an attractive positive for cross-border transfers. However, while the cryptocurrency’s flagship advantages are being identified as the key factors, we cannot completely rule out the advantages of fiat currencies.

The proposed symbiotic relationship:

The authors proposed that there would likely be a symbiotic relationship if cryptocurrencies like Bitcoin gain a wider user base and good levels of adoption. For example, when the cost of using one currency rises, the other is likely to fall thereby increasing the attractiveness of the other option. While in cases where factors like speed of transfer or any other factor that influences the priority of decisions, either of the currencies might take precedence depending upon the necessity.

The authors wrote:

“High costs of using fiat currency increase the demand for digital currency. Similarly, high costs of using digital currency relative to fiat currency raise the demand for fiat currency. In a world of imperfect currencies with uncertain costs associated with the use of a currency, it is unlikely that the relative costs of using digital currency will be low enough to drive out and accordingly crowd out fiat currency entirely.”

How the findings will assist central banks:

Most of the Central Banks are currently not in a position to regulate or monitor cryptocurrency as the impact of this sphere over the existing monetary system is something beyond speculation. However, the paper gives some insight into how we can expect the future dynamics of crypto and fiat currencies to shape up. The authors believe that the results of their paper can help shape up the future of a composite monetary system across the globe.

Why South Korea’s Bitcoin adoption might turn the volume tables this year

Posted on March 16, 2017 | by [email protected]

‘2017’ saw a monumental shift in terms of Bitcoin volumes, where growing cryptocurrency adoption has risen significantly over the past year. The opportunity to recognize their contribution to the Bitcoin volumes and their growing adoption was provided when Chinese Exchanges started imposing transaction fees on their trades. The volumes dwindled significantly and the Exchanges’ decision to ban withdrawals came as the final nail in the coffin. While things were looking rough for Bitcoin, other Asian countries stepped up with unbelievable adoption levels and supported the currency prices. While Japan has been the fore-runner, another country that went unnoticed in this bid would be South Korea. Let’s delve deep into Korea’s Bitcoin story:

The remittance market:

The remittance game has been strong with South East Asian countries as they capture 60% of the remittance market in the world. The South Korea-Philippines corridor hosts remittances startups that bank on Bitcoin to make the transfer. This has earned the startups a popular nickname called ‘Rebittance startups’, whose number has been increasing significantly in South East Asia. Most of the startups aren’t even present in the country but make rebittances possible over messaging apps like Facebook messenger and Viber. The Korea-Philippines corridor covers 20% of South East Asian remittances and are cheap when compared with Western Union or other traditional cross border transfer methods.

The efforts of Korbit:

Korbit is the first South Korean Bitcoin exchange that has worked relentlessly for mainstream adoption of the cryptocurrency. The exchange has 33,500 registered Bitcoin users with and is one of the top two exchanges by volume. The exchange offers a unique service called ‘Hyphen’ where businesses can send payments to any bank account in over 30 countries globally using Bitcoin. South Korea is the hub of tech startups that have revolutionized payments sector and fintech. Hence Bitcoin adoption hasn’t picked up significantly in the past but thanks to the efforts of Korbit, things are changing now quickly.

The regulations framework:

The Korean government has been very cooperative when it comes to Bitcoin and other cryptocurrencies. The Financial services committee has been considering to launch a cryptocurrency of the state that would facilitate transactions and strengthen the Fintech network. They are planning to propose a regulatory framework for Bitcoin based businesses in 2017 and monitor the currency’s movements in and out of the country. For a country with an annual remittance measure of $6.7 Billion, Bitcoin with encouraging regulations in place would be a good catalyst for growth.

Is the world slowly turning towards a #bitcoin oriented economy?

Posted on November 21, 2016 | by [email protected]

When one sees that the applications of a technology are multifold, with time it would impact the legacy systems. When it comes to cryptocurrencies, the legacy system is the existing financial setup. That being said, the important question here is how are cryptocurrencies impacting it? Well, the existing financial system has many loopholes which might be dangerous if not properly monitored. Anyone who witnessed or experienced the brunt of the 2008 housing collapse would understand this really well. Too much control over the purchasing power of money and its manipulation can be hazardous. Even the Governments and the Central Banks have come to realize this off late. This has led to the experimentation of State owned cryptocurrencies that are decentralized and open. Let’s look into how countries are experimenting with them in their nascent stages:

Russia hates Bitcoin but wants to have its own cryptocurrency:

After China, Russia became the second country to ban Bitcoin. But as hypocritical it might sound, Russia is considering the possibility of introducing a national regulated cryptocurrency. The Russian Federal Financial Monitoring Service (Rosfinmonitoring) revealed this according to the Kommersant newspaper. The idea of introducing a cryptocurrency is being discussed with representatives of banks and at meetings in the Finance Ministry. Though it would be a cryptocurrency, Russians are planning to make it a bit centralized as against bitcoin. A Russian regulated cryptocurrency should not be a non-emission currency but it will have its issuer with rights and responsibilities. This issuer can be “financial organizations that will be entrusted with the emission of cryptocurrencies.” This activity is most likely to be subject to licensing, Rosfinmonitoring said.

South Korea’s progressive take:

South Korea can be credited as the most progressive nation when it comes to cryptocurrencies for the variety of applications they provide. From a wide range of vendors accepting Bitcoin to the launch of the first Bitcoin based ETF in the world, Korea has always been ahead.

Recently,the chairman of South Korea’s Financial Services Commission (FSC), Yim Jong-yong came out with an interesting announcement. He said that his department will “Lay the systemic groundwork for the spread of digital currency.” The FSC is the South Korean government office overseeing financial services. In 2008, the department assumed authority over all financial policies regarding the financial market. No details were given about the form or technology that the FSC’s digital currency will use. Basing on the local experimentation, it is believed that they would be using a new cryptocurrency based on Blockchain Technology.

World’s oldest Central Bank is in the race too:

Sweden’s central bank is reportedly considering the issuance of its own digital currency, ekrona. This is primarily to address the significant decline of the use of cash in the country. First revealed in a Financial Times report, Sweden’s Riksbank could introduce and issue its own digital currency before the turn of the decade. Sweden has seen a rapid decline of the use of physical cash – both coins and notes – in recent times. It is estimated that the Circulation has dropped by 40% since 2009, leaving Riksbank little choice. A large number of Swedes have abandoned cash for cards and other forms of digital payments turning it into a cash-free society.

South Korea planning to launch its own digital currency over blockchain?

Posted on October 26, 2016 | by [email protected]

South Korea is one of the fore runners when it comes to technology and its applications. The country enjoys a rich technological heritage with well-regulated and generous venture capital backing. Owing to this favorable set-up, South Korea has become the home for diverse tech startups that have gone on to become market giants across the globe. Even in the case of cryptocurrencies and Blockchain, all these observations are consistent. After achieving superior levels of expertise in digital assets and blockchain, the authorities are now planning to launch a national digital currency. While this move certainly is gutsy, let’s look into whether South Korea is actually prepared enough to handle it:

History of Cryptocurrencies:

When it came to cryptocurrencies, South Korea has always kept an open mind and has been liberal about the proceedings. Right from 2010, there has been liberal regulation of Bitcoin and startups based on the cryptocurrency evolved effortlessly. The transition from traditional finance to evolved Fintech happened with little friction. Even Public fund managers were able to incorporate Bitcoin indicating the kind of regard Bitcoin has been enjoying.

Out of one such instance, came the first ever Exchange traded fund (ETF) of Bitcoin across the world. While in USA, Winklevoss brothers are finding it difficult to get their ETF approved, Korea was able to launch it. The Korea Exchange, official exchange of South Korea would be hosting this ETF along with other products it offers.

Merchant Adoption:

The merchant adoption in the country is rising and is evident in the way the exchanges have launched adoption schemes. Since 2014, Coinplug has been building Bitcoin infrastructure in Korea with over 7,000 ATM machines. They have introduced okBitcard, which allows buying Bitcoins instantly over the counter. This facility is available at over 24,000 convenience stores.

Apart from Coinplug, Korbit has a very strong presence in Korea with over 10,000 ATM machines and 50 banking institutions. These banking institutions can receive remittances from bitcoin senders. The service provided by Korbit for these payments, ‘BitWire’, received good response.

Setting up the currency:

At 12th annual FinTech Demo Day in Seoul, the chairman of South Korea’s Financial Services Commission (FSC), Yim Jong-yong, announced his department’s plans to lay groundwork for spread of digital currency. The FSC did not reveal any details as to what form or technology the digital currency will use. The government and the local financial industry players will launch pilot projects this year with Blockchain. The work would involve setting up new National cryptocurrency on the framework of Blockchain.

The department is offering three trillion won ($2.65 Billion) in funding over the next three years, to financially support the development of the fintech sector in South Korea.