[UDC Report] Government should allow investment not speculation
[UDC Report]-10 Adopting digital securities is a global trend. After Denmark adopted them in 1983, most members of the OECD followed. Korea adopted digital securities on Sept. 16. Risk of digitalization Not only digital securities, but all digital assets, like cryptocurrencies, create kind of a crack in a securities market that was long based on paper securities. Kim Do-hyung, CEO of blockchain-based fintech company Finhave, pointed out during the Upbit Developer Conference on Sept. 5 the three major risks digitalization of assets could bring. First is the risk related to custody. It is easier to understand if you think of the massive fat-finger error of Samsung Securities, where some of its employees sold "ghost stocks" mistakenly issued by the company. Samsung Securities was planning to pay out 1,000 won in cash per employee shares but instead mistakenly allocated 1,000 shares per employee share. It issued 2.81 billion of these shares. This happened because the employees could issue stock by inputting numbers into the computer rather than issuing the stock in paper form. Secondly, there is risk involving the counterparty. There is a time lag from when a transaction takes place and the money from that transaction is transferred. In the local stock market, it takes roughly two days to cash in stocks. In Japan it takes three days. As the delay leads to an unsettled balance, countries are making an effort to reducing the time to realize stocks. The third risk is related to information asymmetry. Digitalization has made it possible for information to be distributed and shared in real time. The problem now is who gets information before others. A policy on fair disclosure has been put into place to solve the information asymmetry problem, however, there is still a long way to go. Regulating authorities should regulate services not the technology itself The conclusion of the debate regarding the regulatory direction on digital assets that took place during the UDC2019 was that "clear regulations can nurture the industry." It was rather an obvious conclusion. Still, there is one thing to touch on before talking about regulation. A common mistake developers make when starting a business related to cryptocurrencies is believing that technology can solve everything. Alexander Hoptner, CEO of Germany's Boerse Stuttgart, said regulating authorities regulate services and not the technology itself. He said it is obvious for regulators to think one should go to prison if they violate regulations. “Until 2017, regulations for cryptocurrencies were rather vague in the Asia-Pacific region, but now much progress has been made,” said Kim Kook-hyun, who is in charge of Upbit's Asia-Pacific business. He mentioned Singapore as a good example. "Singapore was able to raise the largest amount of money in the world through initial coin offerings last year after the Monetary Authority of Singapore made guideline on cryptocurrencies and continuously updated it." Does the government want natural death of market? Making regulations is the least a country can do to minimize damage incurred from adopting new technologies. It is not a means to deter technological development. While Southeast Asian countries are making strides in the cryptocurrency sector, the Korean government still argues cryptocurrency and blockchain technology can be separated and is working to make the cryptocurrency market wither. In the meantime, Facebook has announced Libra and Bakkt launched bitcoin futures. As of Oct. 7, no Korean cryptocurrency exchange was in the top 30 exchanges listed by CoinMarketCap. ※UDC 2019 videos and presentations can be found at https://udc.upbit.com/program/detailed_program, also the full report can be found at https://static.upbit.com/reports/udc2019_report_en.pdf. This report was sponsored by Upbit, and the information in it is based on the Upbit Developer Conference held at Grand Hyatt Incheon on Sept. 4 and 5.