Blockchain pioneers unfazed by market woes

Despite several days of plummeting cryptocurrency prices, Korea’s fintech entrepreneurs remain upbeat about the prospect of the token economy being revitalized next year, when governments around the world are expected to have a better handle on related regulations.

“Cryptocurrencies will definitely become an asset class in the near future, even though their value has been nose-diving recently” said Pyo Chul-min, founder and CEO of blockchain start-up Chain Partners and chairman of the Korean Blockchain Business Society, at the 2018 Fintech Conference in western Seoul on Wednesday. “That day will come and we have to be prepared.”

Bitcoin prices globally plunged to below the $4,500 mark as of Wednesday afternoon, dropping almost 30 percent in the past week after the U.S. Securities and Exchange Commission slapped penalties on two cryptocurrency start-ups that conducted initial coin offerings without registering them as securities offerings. That measure re-ignited fears about cryptocurrencies crashing.

Wednesday marked the last day of the two-day inaugural conference hosted by the Korea Fintech Industry Association and supported by several financial and internet regulators to discuss the evolution of finance and fintech.

Simon Kim, CEO and partner of Hashed, a leading crypto fund and accelerator in Seoul, echoed the view.

“We are at a strategically crucial time. The innovation [with cryptocurrency] will happen, no matter what,” he said. “We wish that you join the move of cryptocurrencies, security tokens and decentralization changing the world.”

Lee Jun-haeng, CEO of Gopax, a Korean cryptocurrency exchange, also said the massive inflow of institutional investors indicates the market has a bright outlook.

Kim mentioned several factors that support his rosy outlook with regard to Korea in particular. Korea has the world’s most advanced IT infrastructure and lowest illiteracy rate, Kim said, and Koreans have a tendency to make high-risk, high-return investments. Even though ethereum comes with a much bigger risk than bitcoin, the trading volume of ethereum is highest in Korea globally. The trading volume for bitcoin is No.5, Kim noted.

Korea also has a big government but is lenient enough to listen to the opinions of its citizens. In countries where cryptocurrency is popular - such as Singapore and Estonia - Korea has the largest local market, with the exception of Japan.

Kim also predicted that most utility tokens or tokens created for crowdfunding purposes with no real asset attached that have been issued so far will go bust because their business models are wrong and the creators are not competent. The silver lining lies in the fact that highly qualified developers - including former workers at Google, Facebook and Amazon - are joining the blockchain and token industry, he said.

The panelists at the conference all agreed that the next big thing in the blockchain ecosystem will be “security token offerings,” an emerging method of raising funds as an alternative to initial coin offerings, which are under harsh regulatory monitoring.

Securities tokens differ from utility tokens in that they pay dividends or invest in other tokens for their owners using traditional financial assets such as bonds, debentures and stocks, and they abide by strict securities guidelines.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]