By Ahn Chan-sik
Starting with Switzerland’s Zug, followed by the U.K.’s TechUK and China’s Lujiazui Special Economic Zone, the concept of a “Crypto Valley,” now existing in various locations, offers a variety of benefits for startups that nurture and develop blockchain and cryptocurrency-related industries around the world.
In Korea, while the government has designated blockchain as one of its top 10 projects for promotion, it still seems to separate cryptocurrency from the sphere of blockchain and takes a restrictive stance toward allowing cryptocurrency activities. More broadly, the government has not been very active in establishing either a Crypto Valley or a blockchain valley.
Recently, however, some members of the National Assembly have urged the government to enact laws related to the establishment of a Crypto Valley or blockchain valley, simultaneously drawing public attention to this idea.
Korea maintains a so-called positive regulatory system, which treats new technology as basically illegal, unless relevant statutory provisions have been provided in advance. In this regard, to enable cryptocurrency and blockchain enterprises to operate relevant businesses or projects of innovative technologies, as well as to promote tax benefits, R&D support and relaxation of related regulations, there must be a special act directly attached to any Korean-style Crypto Valley.
For instance, there already exist some special acts, such as the Special Act on Jeju-do Development, the Special Act on the Promotion of Special Research and Development Zones, the Act on Special Cases Concerning the Regulation of the Special Economic Zones for Specialized Regional Development, and the Act on the Creation and Development of Financial Hubs.
Despite these, since blockchain technology is a new phenomenon distinguished from traditional technologies, it should be intensively invigorated by various kinds of relevant support and consolidated by the enactment of a special act, rather than operate under existing laws and regulations.
If it is difficult to pass or enforce any special act right away; considering that it requires much time and effort, we can think of alternatives.
For example, by applying a so-called “regulatory sandbox,” startups that employ blockchain and/or cryptocurrency techniques may be exempted from the application of existing regulations. In such a test-bed environment, they would be motivated to conduct various experiments.
In addition, regulatory authorities may validate a “no action letter” to guarantee that the authorities will not take punitive action against any related business that has been pre-judged not to be of great concern or a problem after a series of authorities’ evaluations, to reduce the legal burden of companies and also any related legal risks.
It is cautiously anticipated that current efforts by various lawmakers and local governments to spur interest in a Korean-style Crypto Valley may generate great opportunities to activate blockchain and cryptocurrency businesses in Korea. But at the same time, the interested parties generally hope that such moves will not end up being a mere political gesture to gain votes from the electorate.