Digitalization of the South Korea’s second largest city
Designated as a blockchain regulatory-free zone since July 2019 (the only one in Korea), Busan is regularly mentioned in the headlines of Korean newspapers for its ability to not only introduce blockchain applications but also to implement disruptive technologies that have the potential to enhance the daily life of its residents. In this regard, this is not surprising to see that the minister of the Korean Ministry of Science and ICT has announced the launch of a large-scale blockchain technology development project at the ‘Blockchain Technology Development Project for the Data Economy’ briefing session held at the Busan’s Special Blockchain Regulatory Freedom Zone on July 16th. This project is part of the ‘Comprehensive Digital New Deal Plan’, and a total of 113.3 billion won will be invested over five years from this year.
While being a blockchain regulatory-free zone, the city that hosts the largest port in South Korea is laying the groundwork for a modernization of the traditional financial industry through the establishment of a digital asset exchange (1). It also strives to improve the life of its residents by launching a digital wallet enabling the storage of a variety of digital certificates (2). Even the private sector is supporting this effort since one of the major banks from the city is allowing its customers to access banking services without ID cards (3)!
Busan City to create a digital asset exchange
Busan Metropolitan City is looking for becoming the first local government to establish an exchange that allows the transaction of digital assets including cryptocurrency. Since last April, the local government has been pushing for the establishment of a “digital asset exchange” in the first half of next year in collaboration with financial companies such as banks and insurance companies.
The digital asset exchange that is being discussed should handle all kinds of digital assets such as securities token and non-fungible token (NFT) as well as cryptocurrencies such as Bitcoin and Ethereum. The exchange also plans to become a comprehensive exchange where traditional stocks could also be traded, with the aim of playing the role of an alternative exchange to the Korea Exchange.
In terms of funding, it will be established with funds jointly invested by Busan City and five to six financial companies, and Busan City will be in charge of the overall function. The board of directors would consist of Busan City and participating financial institutions. According to CoinDesk Korea, the total budget allocated for the project is about $39 million.
Being operated by a local government, the exchange will be operated while following specific guidelines. For example, the listing process will be established according to the one of the Korea Exchange to prevent any listing of bad coin. Also, the Korea Financial Telecommunications and Clearings Institute (KFTC) will participate in the project to strengthen market monitoring and anomaly detections.
The establishment of a “digital asset exchange” promoted by the Busan Metropolitan Government seems not to have any legal or procedural obstacles as there are no related laws restricting the establishment of digital asset exchanges by local governments, and the Financial Services Commission, which is in charge, is not opposed to it. Under the Specific Financial Information Act, there are no restrictions on the qualification of shareholders on exchanges so that there is no reason for the Busan Metropolitan Government’s disqualification in establishing a digital asset exchange with private financial companies, according to the financial regulator.
The Busan Metropolitan City explained the need to promote the exchange business as a moneyless society will come due to the acceleration of the digital economy after Corona, and the institutionalization of digital assets such as tokenization and asset securitization is in progress around the world.
Source: https://www.mk.co.kr/news/economy/view/2021/07/676205/
Busan City provides digital certificate storage service in its integrated digital wallet
Among the efforts led by the Busan Metropolitan Government to digitalize the society, there is the integrated digital wallet service enabling the storage of a variety of digital certificates through the “B PASS” app developed as one of the Busan Special Blockchain Regulatory Zone projects and recently launched by the local government. B PASS is as a mobile application that provides a blockchain-based Decentralized Identifier (DID) mobile identification and “government24”-linked digital wallet services for Busan residents.
According to the Busan Metropolitan Government, about 100 major digital certificates (e.g., certified copy of resident registration, certificate of business registration, certificate of disease, certificate of disability, etc.) issued by the ‘government 24’ app can be viewed and submitted through the B Pass mobile app. In addition to major digital certificates, the B PASS app also enable Busan residents to inquiry their vaccination certificates that include information on covid-19 vaccination and submit them though a QR code.
By enabling the use of various certificates and credentials related to public services, the Busan Metropolitan Government is looking for enhancing the convenience and security related to public services.
Source: https://www.sedaily.com/NewsView/22OX6GYV0O
Accessing banking services without ID card in Busan
Not only the public sector but also the private sector is contributing to the modernization of the daily life in Busan since one of the main banks in Busan announced that it will implement a “digital real-name verification service” using QR code to allow existing customers to perform banking services at the counter without ID cards from July 12th.
The service allows customers to conduct financial transactions after identification process through the bank’s mobile banking app without bringing their ID cards when visiting the bank. For doing so, the bank’s existing customers can use their mobile phones to scan QR codes that are placed at the counter and authenticate themselves through the bank’s mobile app login process. Once the authentication is completed, bank employees can verify the identity of the customers through an ID scan image submitted by the latter.
This service aims at enhancing customer convenience while strengthening security for real name verification by adding mobile authentication steps to the existing real name verification process. The bank is looking to leverage this service to provide innovative financial services that can be easily accessed by customers by logging in the app through the QR code.
Source: https://biz.chosun.com/stock/finance/2021/07/12/A7LUB2HX7VDSDLRLOZJARUBWWU/
Our View: the second largest city of South Korea has nothing to be ashamed of in comparison to Seoul in terms of modernization. Busan residents are living in a city that is constantly improving thanks to the combined efforts from the public and private sector. In this regard, the Busan Metropolitan City is striving to enhance convenience and security of Busan residents when accessing public services by providing disruptive technologies such as the DID-based mobile wallet B Pass. Also, private sector such as banks are also contributing to the modernization by allowing their customers to access banking services without showing their ID cards. Eventually, Busan is also looking for modernizing traditional finance with the establishment of a digital asset exchange. If it achieves the exchange, the Busan Metropolitan City would be one of the first cities in the world to conduct such project. Provided the emergence of central bank digital currency, it would be interesting to monitor this project and to see how it will interact with the Korean Central Bank in the long run.
