“Blockchain and cryptocurrency cannot be separated. This is what Jeju-do thinks.”

Noh Hee-seop, head of the future strategy department at Jeju Special Self-Governing Province, made the remarks during the Asia future fintech forum held at the headquarters of law firm Yulchon in southern Seoul Tuesday, saying, “Cryptocurrency is data being processed in blockchain and functions as a medium of trading and assets simultaneously.” He added, “We can trust cryptocurrency only when blockchain exists. And we can implement services and spur their use only when cryptocurrency exists.” Noh’s statement is taken as meaning that cryptocurrency regulations as well as blockchain policies are necessary.

In his speech under the theme “A blueprint for creating blockchain hub” now being pushed by the Jeju municipal government, Noh said, “Korea’s blockchain and cryptocurrency markets have been beset by a host of problems including scam ICOs, information discord between businesspersons and retail investors, outflow of projects and capital overseas and intimidated local industries.” He emphasized the need for institutionalization, noting that “all these problems have been caused by our insufficient systems.”

“As blockchain technology makes rapid progress, there have been a string of solutions to address problems in the cryptocurrency market. Recently, more stable ICO models have appeared,” he said, adding that “of major countries, only Korea and China ban all types of ICOs despite the fact that there are a wide variety of ICO types.”

Jeju-do appears ready to take a gradual approach by dividing an ICO into three phases. In the first stage, retail investors are excluded and only institutional investors can take part in ICOs. Companies planning for ICOs may have to carry out reverse ICOs only, which require the like of stringent legal reviews imposed when a company conducts an initial public offering.

The second stage envisions allowing retail investors to take part in public ICOs on condition that escrows or other measures to protect investors are applied. A DAICO model, proposed by Vitalik Buterin, the co-creator of Ethereum, can be an option. The DAICO, an acronym combining DAO (decentralized autonomous organization) and ICO, is a sort of escrow model obliging the spread of token funds over time instead of allowing token issuers to collect token funds all at once. And finally, the broad-based ICOs will be allowed only after these two stages are carried out. “Some regions hoping to nurture blockchain startups insist on allowing ICOs across the board but this could entail plenty of confusion from the outset. We need to take the first step carefully at first and then push for expansion after taking measures to protect investors,” he said. Noh described his ICO initiative as “version 0.2” and said he would begin an open discussion if “version 0.5” comes out.

According to Noh, Jeju-do plans to offer regulations specially tailored to cryptocurency segments. Crypto exchanges will be classified as a new type of business. In return, however, their duties will be strengthened. Crypto investment funds will also be classified as a new type of business, taking into account they are invested in cryptocurrencies.

A positive list system (PLS) will be adopted for new regulations. It is seen as a stricter regulatory scheme than the negative list system that allows all acts except those on the list under the relevant law. “This stems from our consideration that cryptocurrency has a smack of finance. But we will adjust the intensity of regulations in consideration of the fact that exorbitant regulations could hamper the attraction of companies and revitalization of business.”

Jeju-do is pressing ahead with a plan to form a consultative body with the central government to put its blockchain initiative into practice. “We will let the central government, local governments and blockchain businesses get together. This is designed to have a nationwide discussion on blockchain,” Noh said.

He justified the creation of a special blockchain zone in the southern island of Jeju by saying that: “Work to build new types of business and draw up detailed regulations at the National Assembly takes longer than we think and during this time, our competitiveness will perish.” “The Jeju blockchain special zone will take firm root as a crypto valley if we act promptly and boost exchanges with foreign blockchain companies,” he said.
/Heungrok Kim Reporter rok@

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