Busan, South Korea’s second-largest city, launched its blockchain initiative four years ago to throw the welcome mat for the growing industry, hoping to attract technology, jobs and people. investment and move away from reliance on maritime trade and tourism.
The problem is that the message didn’t seem to reach the blockchain sector.
Busan, with a population of 3.3 million and home to one of Asia’s major film festivals, was designated a special blockchain zone in July 2019 under former President Moon Jae-in’s administration. . This allowed the city to host blockchain projects that would face restrictions and red tape elsewhere in the country.
Examples include local company Coinplug which is developing a blockchain-based public safety reporting app, and in 2020 the city launched B PASS – a blockchain-based mobile app and all-in-one ID and wallet. electronics for Busan citizens.
However, the Busan Chamber of Commerce conducted a survey in July this year of 465 blockchain companies in the country and found that over 48% were unaware of Busan’s status as a blockchain-enabled area. the blockchain. Another 21% said they had heard of the project, but did not know in detail what it does.
This lack of interest also appears to be reflected in usage of the B PASS, which has been available for two years but only has around 10,000 downloads, according to local media.
Busan’s achievements in blockchain have not been impressive, said Lee Jang-woo, adjunct professor on global entrepreneurship at Seoul’s Hanyang University and a blockchain specialist.
“I predicted this failure to some extent, as only certain services and companies using blockchain technology benefited from the relaxed regulations, while companies using crypto were excluded,” Lee said. He added that South Korea’s negative attitude towards crypto at the time likely influenced this approach.
Change strategy
The city – which sits on the southeastern tip of the Korean peninsula, about 325 kilometers south of the capital, Seoul – is now changing its strategy and has signed agreements in the last two months with three global crypto exchanges. -currency: Binance, FTX and Huobi. The plan is to build the nation’s first city-backed digital asset exchange.
“We will build a new engine of growth for the local economy and make it a global digital finance hub,” Busan Mayor Park Heong-joon said when signing the partnership last month with Binance. , the largest cryptocurrency exchange in the world.
He said the city wants to attract more blockchain talent and is offering tax breaks as part of the package.
Hanyang University’s Lee said the decision to bring cryptocurrencies into the mix made sense.
“Part of that is building the digital asset exchange. So I think [the city] now has the right direction and the right strategy,” Lee said.
Busan needs a revitalization plan. The Chamber of Commerce said on Thursday that the number of local businesses last year with annual sales of more than 100 billion Korean won ($70 million) hit a record high of 27, or half of the 55 recorded in 2008.
And after?
Although Busan has signed deals with global exchanges to create its own city-backed crypto market, details on how the local exchange will operate, what it will trade, and the size of the investments involved are hard to come by. .
An official from the city’s blockchain innovation team, who declined to be identified by name, said Forkast that it is too early to give details on what the exchange will look like.
Lily Zhang, chief financial officer of the latest Busan signatory, Huobi Global, was a bit more forthcoming.
“We are unable to reveal too many details about the exchange, but we do know that it intends to roll out a range of stablecoins and stablecoin-related trading pairs,” Zhang said in a response via email to questions.
“The Busan Blockchain Regulation-Free Zone provides an enabling environment for the development of the latest digital financial technologies. This covers applications in industries ranging from tourism to logistics, lifestyle services and more,” Zhang said.
“These apps are not directly connected to cryptocurrency exchanges, but it increases overall awareness of blockchain technology and could lead to more integrations later,” she added.
Huobi said it would bring 1,500 blockchain professionals from overseas to Busan, while fellow partners Binance and FTX said they would provide technology and infrastructure support to develop the Busan exchange.
Liquidity
Leon Foong, Binance’s head of Asia-Pacific, said Busan can benefit from the liquidity provided by global exchanges.
“And in terms of global liquidity, we’re fortunate to be in a position where we actually have one of the largest pools of global liquidity,” he said. Forkast in an interview.
In return, exchanges see opportunities to return to one of the more attractive crypto markets they left due to tighter regulations, said Lee of Hanyang University. “Partnerships meet the needs of both sides,” Lee said.
Binance and FTX both exited the South Korean crypto market last year due to stricter rules, while Huobi Korea remained but failed to meet requirements for providing fiat-to-crypto services and therefore remains a token-to-token exchange.
All three exchanges have announced that they will open offices in Busan, but Binance and FTX are not expected to operate crypto exchanges.
However, Binance’s Foong did not rule out this option for the future. “We are still exploring, however, we want to do it the right way,” he said.
When Busan signed its partnership agreement with Huobi this month, Mayor Park said in a statement that he hopes the company will “raise awareness of Busan’s strong environment and support for digital finance, so that we can attract more blockchain talent to our city.”
To that end, Huobi said he would be the main sponsor of Busan Blockchain Week 2022, which begins on October 27. This rally could be a key event to check if the message that Busan is open to blockchain and crypto is now strong and clear.