Cryptocurrency, still without legal regulation
Blockchain commercialization requires public awareness and technology

A forum has been prepared to discuss how blockchain, a technology gaining worldwide attention, is being applied to the financial industry and how it will be applied to the domestic financial industry.

The Ministry of Science and ICT and the Korea Information Society Development Institute (NIA) hosted the 'Blockchain Technology and the Future of the Financial Industry Workshop' on the 9th at Sangam Nuri Dream Square.

Lee Hyun-dong, team leader of the ICT Convergence Division at the Korea Information Society Development Institute, said, "The value of hyper-distribution and connectivity of blockchain aligns with the IoT activation foundation-building project that has been ongoing since 2015."

The event proceeded with topics including cryptocurrency market prospects and legal status, the future of blockchain technology and the financial industry, and IoT pilot projects utilizing blockchain technology.

Han Seung-hwan, CEO of Finector, stated, "Blockchain is a system that can become its own bank with the largest network and ripple effect among cryptocurrencies currently available" and "the ICO (Initial Coin Offering) sector is thriving," introducing the current status of ICOs including Ethereum, Cosmos, Aragon, Banco, EOS, and BOScoin.

ICO is a method similar to crowdfunding that collects investment funds for blockchain-based projects. Cryptocurrencies (tokens) are issued on a specific blockchain and sold to early supporters, and investment funds through ICOs are used as development costs for project initiation, making investors shareholders of the project. 'Ethereum' is a representative success case.

Currently, there are no regulations for cryptocurrencies. At best, Switzerland and Singapore, the countries where ICOs are currently most active, have specialized corporations and adopt legal forms. The United States, being sensitive to financial sanctions, has a considerable number of ICOs that block American citizens from participating.

The reason cryptocurrency is difficult to regulate is that perfect control is impossible with a P2P financial system. Additionally, since the issuing entity is neither government nor institution, it cannot function as an interest rate adjustment mechanism. Cases where customers self-authenticate and purchase quantity registration fails are common, and it is sometimes used for money laundering.

The CEO said, "Each country has different positions on how to define cryptocurrency," and explained, "In the case of Bitcoin, it is not something one specific country can regulate. Rather, countries that impose regulation could end up dropping out of the global economy."

He added, "Blockchain can be viewed from three perspectives: investment asset, currency, and technology, and it is currently receiving attention as an investment asset. However, for technology commercialization, it is necessary to enter the currency market," and noted that "the lack of public awareness and insufficient commercialization-level technology are problems," emphasizing the need for mass-market testing.

Baek Jong-chan, consultant at R3, cited reasons why blockchain should be applied from a financial perspective: "In existing finance, the reconciliation process of confirming whether information is identical involved recording first and then verification. Blockchain records simultaneously with verification, which is more efficient," and pointed out "in the concept of system upgrade, the speed of information is faster than the speed of funds."

He mentioned that for blockchain to be applied to the financial industry, confidentiality, ledger authority, compatibility with existing systems, scalability, asset modeling, and legal validity must be prerequisites.