What happens when blockchain startups take over an entire city? Residents of Busan, South Korea’s second-largest city, will soon find out. On June 23, 2019, South Korea’s Regulation Free Zone Committee (headed by Prime Minister Lee Nakyeon) formally designated Busan as a “regulation-free zone” for the development of new blockchain technologies. Busan was one of seven cities to receive regulation-free status, with each city being granted specific regulatory exemptions ranging from digital healthcare to autonomous driving.
Busan’s blockchain startups will explore the potential of a future “token economy,” applying the technology to industries such as tourism, logistics, public safety, and finance. One industry where blockchain experimentation is still strictly limited, however, is cryptocurrency.
According to Coinhub Korea, project spokesperson Kim Hyeonsuk claimed that cryptocurrency and ICO projects are “not in line with the government’s policy.” Instead, Busan will offer a digital voucher where appropriate — essentially a South Korean stablecoin — to enable financial transactions within the city’s blockchain community. The proposed stablecoin will be issued by BNK Busan Bank, one of the government’s partners in the regulation-free zone experiment, and will use mobile wallet technology similar to typical cryptocurrency apps. Tokens can also be exchanged for South Korean won (KRW) at partnering banks.
Busan’s regional government plans to invest around $25 million (29.9 billion KRW) in the experiment, spread across 11 specialized districts within the city. Support for the token economy project is planned through 2021, although this is likely to be extended should the initiative prove successful.
South Korea is not the first country to experiment with the concept of creating dedicated economic zones for blockchain experimentation. Notably, Switzerland has adopted a similar approach in the city of Zug, prompting many to winkingly refer to the region as “Crypto Valley.”