South Korea plans national digital currency using a Blockchain

At Monday’s 12th annual FinTech Demo Day in Seoul, the chairman of South Korea’s Financial Services Commission (FSC), Yim Jong-yong, announced 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 from the Ministry of Finance, making it the government’s top financial regulator.

While no details were given about the form or technology that the FSC’s digital currency will use, other than a suggestion that it would include a blockchain, a consortium on blockchain technology to jointly research and run pilot projects will be launched by the government and the local financial industry players this year.

According to South Korea’s largest news agency, Yonhap News, Yim announced that his department is offering three trillion won in funding over the next three years, worth about US$2.65 billion, to financially support the development of the fintech sector in South Korea.

Yim described the measures behind his department’s FinTech funding spree as the, "Basic direction" of their second-stage fintech development roadmap, which they plan to unveil in Q1 2017. "In the second stage, the government will place a focus on re-designing the existing system to be suitable for the fintech environment," Yim clarified.

- Yim Jong-yong, South Korean Financial Services Commission Chairman

Although this is one of the first times that the South Korean government has spoken up about blockchains, the country’s private sector has consistently been in the news for bitcoin and blockchain technology adoption since 2014. In February, one of the country’s largest banks, KB Kookmin, announced a partnership with the number two bitcoin exchange by Korean won volume, Coinplug, in order to develop remittance and data storage services.

Since 2014 Coinplug has building bitcoin financial service infrastructure in Korea, including over 7,000 bitcoin ATM machines across the country, as well as 24,000 convenience store locations that sell their okBitcard, an over-the-counter way to instantly buy bitcoins.

Coinplug has strong competition, however. Another 10,000 ATM machines and 50 banking institutions across Korea can receive remittances from bitcoin senders. The largest bitcoin exchange in Korea by won volume, Korbit, offers a service called BitWire, to accept these payments, mostly without fees.

The Korean securities exchange (KRX), based in Seoul, is also looking at the technology. In February, the exchange announced its commitment to upgrading their trading engine and keeping securities on a blockchain. They plan to first add their non-listed securities as a test, much like Nasdaq’s Linq exchange has done.

In April, competing Seoul-based securities exchange Daishin Securities announced that they are investigating a similar plan, and trading stocks directly for bitcoin. To make their plan work they’ve partnered with Coinone, a Korean bitcoin exchange and shopping platform.

South Korean electronics giants Samsung and LG, along with Cisco, several large local banks, and the KRX, have also invested in Blocko, a local bitcoin and blockchain startup. Formerly called Coinstack, Blocko offers blockchain IT services and a few public-facing bitcoin services, including a bitcoin cloud wallet, a free blockchain document timestamping service, and a unique government “Public monitor” that keeps track of government documents and promises on the blockchain for the sake of transparency.

- Samsung SDS

Governments all around the world have recently announced that they are investigating their own plans for digital currencies. The trend began when the Chief Scientific Adviser to the UK government released a report in January, advising his Prime Minister and Parliament to consider using a blockchain-based digital currency.

The Bank of England’s Chief Cashier and Director for Notes, Victoria Cleland, fanned the flames in September, giving a speech outlining her bank's work on Central Bank-issued digital currency. Cleland states that introducing a Central Bank-directed digital currency “Could fundamentally change the structure of the financial system.”

The Bank of Canada considered issuing its own digital currency in a report they published in June. The Research Plan for 2016-18 investigates whether the Bank should issue its own digital currency and how it would work.

Digital currency has also been considered in China. Governor of The People's Bank of China revealed that “Digital currency will co-exist with cash for quite a long time before it finally replaces cash." However, he states that with the transaction costs of paper money rising, people will be motivated to opt more for digital money.

The most talked about national digital currency, however, has been DNBCoin, from the Dutch Central Bank, De Nederlandsche Bank (DNB). The bank has been studying its own prototype cryptocurrency for at least two years, and revealed testing of three different versions in June.