South Korea has taken another step towards the legitimization of cryptocurrency with the announcement of a new regulatory initiative that will see blockchain platforms and businesses governed by a new classification system. The new system officially recognizes cryptocurrency exchanges as legal entities, marking the first time the South Korean government has acknowledged exchanges as an industry.
First reported by South Korean crypto news platform The BChain, the new classification system will consider crypto exchanges as “asset exchange and brokerage,” while Blockchain platforms and networks such as Ethereum will be classified as “Blockchain-based software supply and development businesses.”
For the first time, the gov't of South Korea will recognize crypto exchanges as regulated financial institutions.
Previously, crypto exchanges were considered as "communication vendors." Now, they are categorized as crypto asset exchange and brokerage.https://t.co/RJYYLaOLv0
— Joseph Young (@iamjosephyoung) July 5, 2018
New Classifications Legitimize Exchanges
The new classification system developed as a joint initiative between the South Korean National Statistical Office, the Ministry of Science and Technology and the Ministry of Information and Communication, will consist of a series of main classification areas, with subdivisions within each classification allowing for significant nuance in the labeling of blockchain enterprises and platforms.
According to a government source quoted by BChain, a full outline of the classification will be released later this month. Some of the classification subdivisions have been released by South Korean state officials, however — such as categories that govern the development and distribution of blockchain-based mobile game software, or specific subcategories for blockchain-based cloud hosting services.
South Korea Softens Stance on Crypto
While the South Korean government has not yet announced a full endorsement of the cryptocurrency ecosystem, the regulatory stance within the country has gradually shifted towards a more distinctive posture for 2018.
Recently, South Korea’s National Assembly put forth a proposal that could see domestic initial coin offerings (ICOs) legalized, reversing the blanket ban on ICOs issued in the country in September 2017. Submitted at the general meeting of the Special Committee on the Fourth Industrial Revolution on May 28, the proposal would allow South Korea-based ICOs to launch and operate under the proviso that they meet investor protection requirements.
Rep. Hong Eui-rak of the ruling Democratic Party of Korea, who spearheaded the parliamentary challenge, elaborated on the intent of the potential ICO legalization proposal:
“The bill is aimed at legalizing ICOs under the government’s supervision. The primary goal is helping remove uncertainties facing blockchain-related businesses.”
In addition to considering the legalization of ICOs, the South Korean earmarked 240 billion Won, or around $200 million USD, to promote blockchain-based innovation within the country. Announced by the Ministry of Science and ICT of South Korea, the Blockchain Technology Development Strategy is focused on accelerating distributed ledger technology development, nurturing 10,000 professionals and 100 blockchain-focused companies.
While the South Korean government has traditionally retained an anti-cryptocurrency stance, the economic benefits demonstrated by other pro-blockchain countries appears to be incentivizing the government of the technologically forward leaning nation to establish a more nuanced position on the future of blockchain development.
Cover Photo by Ambir Tolang on Unsplash