Entirely hands-off

Yi Jung-jae
The author is a columnist of the JoongAng Ilbo.

Mr. K quit a decent job to start a blockchain company. His company recently issued the BK (Beautiful Korea) coin and will soon list it on a cryptocurrency exchange.

“A coin will be marking 3,000 tourism stops across Korea. The location can be a famous eatery or an ancient Buddhist temple like Bulguksa, any place that can represent Korean assets and value. BTS label Big Hit headquarters or Blackpink residences can be destinations for K-pop pilgrimages. Samsung founder Lee Byung-chull’s birthplace in Daegu and Chungmuro, home to film-making in Korea, can be included. People around the world could seek out Korean charm and at the same time earn coins. When 3,000 stops are all visited, they can collect 3,000 coins. The BTS-stamped coin itself can be a souvenir. The coins could be spent in restaurants too. This can open a new chapter for Tourism Korea,” he explained excitedly.

“The convergence of digital assets and reality will define the industry of the future,” he added. But why a digital coin? He chose the means as he cannot raise capital through the stock market with just a business idea. His company is yet to generate revenue or income and therefore does not meet initial public offering (IPO) requirements. He cannot waste time trying to raise funds and investors through traditional procedures.

The digital market changes overnight. He could lose an opportunity if he dithers. Listing through the cryptocurrency market can easily solve his problem. “From blockchain technology to experts, the Korean habitat for cryptocurrency is the world’s best,” he said. He argued a market that can breed new industries based on promising business idea should not be ruined.

However, he will have to traverse carefully the blurry line of illegality and legality to achieve his dream. Initial coin offerings (ICO) in Korea have been banned since the first crypto boom in 2017. As a result, local companies set up enterprises in Singapore and the Virgin Islands to issue coins. Mr. K set up his company in Estonia. Since there are no regulatory and supervisory institutions in Korea, there are a myriad of coins whose validity and prospects cannot be deciphered. According to CoinMarketCap, over 1,000 coins are being traded in Korea compared with 1,000 in 2017.

The listing process is random. The exchange has the authority over listing and delisting. The government is entirely hands-off as it regards digital coins as illegal. The guidelines are ambiguous and differ by exchange. They merely check if coins are copied or bogus and the origin of the issuer. It is difficult to assess if the issuer is reliable and managed transparently. Since the coins and exchanges are beyond the law, no one is liable. Having entirely neglected the sector, authorities can hardly speak of investor protection.

Every market has destructors that defy regulations. They can drive innovation. Cryptocurrency is some sort of market destructor. Rules and supervision contain market destroyers. Governments address market destroyers in three ways. The United States cherry-picks decent coins and brings them onto the legitimate field. This is how Coinbase went public on the Nasdaq. China lets them be and then eliminates or persecutes them in one go if they make trouble. South Korea takes neither approach. It distracts with rhetoric if controversy arises. It cannot be expected to help build a new industry.

Young people flock to the crypto market and are well aware of the risks. They do not have any other choice, or hope for a break in their life. The government promotes lotteries, which are a bigger waste of money than digital coins. So why is it so disapproving of digital coins? It claims it cannot encourage gambling. Yet it plans to tax the capital gains from crypto investment. A flophouse host is better than the financial authority as he or she at least lends money and serves drinks to gamblers.