South Korea is making efforts to prepare “Systematic Groundwork” for the spread of digital currency. According to South Korea’s Yonhap agency, the country recently hosted the 12th Fintech Center Demo Day event, where Yim Jong-yong, chairman of the Financial Services Commission (FSC), declared that the South Korean government would also offer $2.65 bln in financial support over the next 3 years for the development of the fintech sector.
South Korea going beyond Bitcoin
The push for a national digital currency is nothing new. Many other countries have been toying with the idea including Netherlands, United Kingdom, Canada and even China. We know from the Yonhap news release that while a consortium on Blockchain will be launched this year for joint research and pilot projects, financial support will also be made available by the government. It is pertinent to mention here that the FSC is the South Korean office responsible for financial services.
They have recently also launched the world’s first fintech open platform to ease development of innovative fintech services. FSC describes the future of this platform on their website:
“The Korea Financial Telecommunications & Clearings Institute and Koscom will provide virtual data and simulation environments for Fintech firms to run test operations of their Fintech services and offer technology consulting services. The Financial Security Institute will ensure stability of Fintech services and financial consumer safety before the launch of the services.”
The case for a cashless world
There are obvious benefits to digital currencies. The success of Bitcoin has shown already that a digital currency can co-exist with traditional paper currencies and facilitate movement of funds globally cheaply and efficiently. The question now is whether these digital currencies issued by nation-states will become mainstream within our lifetime and if so, what shape they will assume.
As recently as Oct. 2016, the New Yorker carried an article titled ‘Imagining a Cashless World’ by Nathan Heller. The author quoted Kenneth S. Rogoff, former chief economist at the International Monetary Fund and author of the book The Curse of Cash as saying, “Paper currency has become a major impediment to the smooth functioning of the global financial system.”
The professor then goes on to make the case for a paperless cash world by stating that most of the paper money is used to pay people off-the-book wages or is sitting in safe-deposit boxes in Zurich. In effect, the case for digital currencies becomes stronger if we examine how the present paper-based currency is being utilised by shady elements.
East Asia is taking lead
If South Korea does issue a national digital currency, it would be a revolutionary step but it would not be the first country to have done so. This has already been done by Ecuador and it is the first country to issue digital money. However the national push for supporting Blockchain technology as outlined in the 12th Fintech Center Demo Day event is indeed commendable.
South Korea’s neighbour Japan too has taken steps to capitalise on the Blockchain and Bitcoin wave. Japan has even gone as far as to recognize Bitcoin and digital currencies as money. There is definitely a growing interest in digital currencies in East Asia, with Japan having an established culture of currency trading. Bitcoin.com in an article asked the question ‘Is Japan Becoming The New Bitcoin Trading Superpower?’ The article read, “Increasing Japanese volumes could also simply be the effect of a national obsession with FX trading, and a more permissive regulatory approach to digital currency businesses in recent months.”
So who will be the first to come out with a completely digital currency and would it be embraced by the people? As Kumar Gaurav, founder and CEO of Caasha says, “It looks like more of the reason that, no developed nation want to stay last in the game, but have no concrete plan on what to do next. With US, Japan and UK followed by South Korea now, it is too early to say where it will head. The Bitcoin based cryptocurrency is still in the experimental state and to use it to replace the current monetary system is a risk. As humans, we are evolving and the growth will continue sooner or later. The announcement made by FSC chairman to boost the fintech sector with support for Blockchain will definitely politically strengthen its position in the Blockchain tech race.”