It’s often outside the major US and European markets that blockchain companies produce the most interesting innovations, thanks to differences in both the regulatory and business environments in places like East Asia.
It’s also why bitcoin and blockchain companies in places like South Korea and Japan often surprise people. They move in new directions, raise investment from unexpected sources and find new user bases. It’s proof that this technology is truly a worldwide phenomenon, and those interested should watch all regions for inspiration.
As 2016 comes to a close, I’d like to highlight what I consider the year’s three most significant blockchain-related events in the South Korean market – and make three more predictions for 2017.
First, here’s the good news from the last year:
1. South Korean Financial Regulator Releases FinTech Roadmap
South Korea’s Financial Services Committee (FSC) announced its two-step FinTech Development Roadmap in October 2016.
The roadmap comprises two steps: eliminating irrational regulation and improving FinTech industry systems. Notably, the roadmap includes the creation of the Bank Joint Blockchain Consortium and the institutionalization of digital currencies such as bitcoin, as well as establishing a finance test bed for new FinTech services.
With its roadmap, the government is trying to remove hurdles that may obstruct the ‘Fourth Industrial Revolution’ in South Korea, as well as nurture an environment for FinTech companies to develop their business more freely.
2. South Korean Central Bank’s Research Project Focuses on Blockchain
The Bank of Korea conducted a joint research project specifically focusing on blockchain technology.
This initiative looked at several aspects of blockchain technology, including current industry issues, technical and political challenges for blockchain adoption in the financial system.
Blockchain applications in the Bank of Korea’s payment and settlement system were a major focus and, of course, blockchain-based digital currency was also explored.
3. Major Financial Institutions Work to Implement Blockchain Solutions
A number of financial institutions have realized blockchain technology’s potential and have developed several use cases, as well as announcing a plan called the ‘Starting point of the Blockchain Movement’ within the last year.
As examples of those projects, KB Kookmin Card and KB Savings Bank launched a private blockchain-based identity authentication platform, and KB Kookmin bank developed an overseas remittance platform.
Further, the Korea Minting and Security Printing Corporation (KOMSCO) has started working to develop a blockchain-based digital asset platform. Coinplug played a role in developing many of these use cases and platforms.
Furthermore, Korea’s five largest banks – KEB Hana, Shinhan, Kookmin, Woori, IBK – also joined the R3 consortium, while three Korean institutions – Coinplug, Samsung SDS, and Korea Securities Depository – became members of the Hyperledger project.
Such moves reflect just how seriously financial institutions in Korea are taking this new technology.
And now, my predictions for 2017:
1. Hurdles Will Be Lowered for Blockchain Adoption
The FSC roadmap focuses on deregulating the financial industry and supporting FinTech companies.
Since the biggest hurdle for the FinTech industry is constrictive regulation, the roadmap’s focus on deregulation should encourage financial institutions to adopt blockchain technology and develop even more use cases.
2. Korean Financial Institutions Will Form Local Blockchain Consortia
In 2017, I predict that financial institutions will go beyond joining global consortia, and start to create their own combined blockchain inititives in Korea.
A fundamental aspect of the FSC roadmap is the creation of the Bank Joint Blockchain Consortium, which is expected to be finalised by the end of this year and commence activities in January.
Additionally, there have been discussions regarding another blockchain consortium for capital markets, with an effort to launch next year. The capital market consortium will seek to develop blockchain use cases such as authentication services, document storage, OTC market exchange platforms, and clearing and settlement systems.
Each consortium will test blockchain in its own market, develop business use cases and, ultimately, produce a joint blockchain platform.
3. And Finally, a Blockchain Adoption Triggering Point
Financial institutions in Korea regularly update their IT infrastructure, and 2017 happens to be a major update planning year for designing next-generation platforms.
Many of these institutions are now considering blockchain as one of their options. Furthermore, financial institutions are anticipating the time when smart contracts are fully commercialized and combined with private blockchains. This technology has the potential to create an enormous synergy effect with almost limitless use cases.
I believe 2017 will be the year Korea’s financial institutions actively adopt private blockchains for their main services and systems, and investigate what else the tech can do. Estimates say that about 70-80% of major banks in Korea will use blockchain in some form, with many of them undertaking smart contract pilot schemes.
Investors and developers in other countries would do well to observe over the coming 12 months, and consider how they could put Korea’s outcomes to good use elsewhere.
The future for blockchain technology is very bright.
Have an opinion on blockchain in 2016? A prediction for 2017? Email firstname.lastname@example.org to learn how you can contribute to our series.
Seoul fireworks image via Shutterstock