Blockchain Governance Initiative Network – workshop on govt strategy

Blockchain Governance Initiative Network had its 5th block meeting where K.S. Park spoke at the following session on April 6:

Session 2: Panel: Momentum on blockchain ecosystem and Government strategy on cryptoassets in Asia

Time: 9:45 am JST (4/6) = 12:45 am UTC (4/6) = 8:45 pm EDT (4/5)

Panelists:

• Invited Speakers
  • Yutaka Soejima, Director General of the Institute for Monetary and Economic Studies, Bank of Japan
  • Yuji Suga, CGTF
  • Jumpei Miwa, Recruit Co/ Tokyo Institute of Technology
• Hiromi Yamaoka, DCJPY
• Pindar Wong, Chairman of VeriFi
• Kyung Sin Park, Professor, Korea University Law School
• Moderator: Joi Ito

This session includes Q&A and discussions with all participants.

His remarks were as follows:

The Korean government recently organized Metaverse Alliance, a multi-stakeholder group of government agencies and private companies engaging in metaverse.  The metaverse and financial transactions taking place within it have been great metaphors for the future of cryptocurrencies. I want to discuss Korea’s policy environment for cryptos.

Korea’s crypto currency regulation is not very restrictive on text but all Initial Coin Offerings have been suspended since 2017 after the financial authorities announced that they will regulate them like IPOs at the height of cryptocurrency exchanges in the country. However, there is still no law against ICO.

One explicit regulation of cryptos is the amended Income Tax Act which imposes a flat 20% tax on income from sale or lease of virtual assets above 2.5 million KRW.

Another explicit regulation on cryptos is the Special Financial Transactions Reporting Act (enacted 2021.3.25) which requires all virtual asset enterprises to report to Korea Financial Intelligence Unit (KoFIU) and imposes on them and their service providers anti-money-laundering obligations, adopted from Financial Action Task Force(FATF)’s 2019 Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers (VASPs)」, which by the way has been updated to govern Defi(Decentralized Finance) and NFT(Non-Fungible Token).  As part of the anti-money-laundering obligations, all crypto exchanges must require real-name registration of the users. So for instance, Binance is expected to shut down soon.

The metaphor between cryptos and in-metaverse transactions has become real in games where people “play to earn” (P2E) coins which now came to have real value, being issued in cryptocurrencies. However, Nexon and big game makers in Korea have not joined Metaverse Alliance.  It is Samsung, Hyundai, and others using metaverse not for immersive experience as games but for technical use, such as remote factory operation.

The reason for absence of game houses in the Metaverse Alliance is that Korea actually banned P2E games by a law that bans exchange of game items and coins into real money (Game Industry Promotion Act Article 32 Item 7). You can buy game items and coins with real money but cannot sell them for real money. The rationale is that games will become like gambling which is another strictly suppressed activity in Korea. It is odd because the definition of gambling includes chance and people playing games often earn game items through skills, not by chance. What should be regulated is chance, not monetization. One can make an argument that gamers accumulating game items and coins are like artists making drawings and paintings, and the law can be analogized to prohibiting artists from selling his/her creations. At any rate, who knew that this archaic law will become a bottleneck on development of cryptocurrencies in Korea?