South Korea has been at the forefront of the blockchain movement, with some of the highest density of cryptocurrency traders anywhere in the world. Now, as the frenzy around cryptocurrency prices recedes (Bitcoin is around $7350 right now, down from a high of almost $20,000 last December), the country is starting to consider the more utilitarian aspects of blockchain that might not immediately lead to riches.
Seoul’s mayor, Park Won-soon, discussed the city’s plans to launch what is currently being dubbed the S-coin in an interview with CoinDesk. In his vision of the program, the coin could be used for subway fares, as well as “a payment method for city-funded welfare programs for public employees, young job seekers and citizens helping the environment by saving electricity, water and gas.”
That’s a remarkable statement coming from an office that is widely considered to be the second most important in the country. It’s also a far cry from the strong opposition that national leaders and regulators voiced toward blockchain — and cryptocurrencies in particular — during the run up in Bitcoin and Ethereum prices last year, particularly in the wake of a series of Bitcoin heists by North Korea.
Back then, the Korean financial authorities and the Justice Ministry said that they were considering outright banning cryptocurrencies. Now, over the past few weeks, national authorities have quietly floated new proposals around Initial Coin Offerings (ICOs), potentially creating a procedure that would allow ICOs in well-regulated circumstances. Mayor Park also said in his interview with CoinDesk that further regulation would be necessary around blockchains before any of Seoul’s proposals could be brought into effect.
The invention of blockchain, and Bitcoin in particular, was seen by many in the community as a way to “disrupt” politics as usual, by moving power away from central authorities to decentralized players. However, the technology increasingly looks like it will be subsumed by the state to improve existing institutions.
South Korean cities, like counterparts elsewhere around the world, are investigating whether blockchain technology could provide mechanisms like algorithmic zoning. City governments often hold many records of interest to blockchain specialists, including property records, ID records, zoning codes, business and health licenses, as well as construction permits. Creating a transparent and efficient clearinghouse for such information could generate significant gains for the quality of urban governance.
In this context, it is important to clearly delineate blockchain as database and cryptocurrencies as money. The proposals from Seoul and elsewhere have been designed around the former. Even when such tokens might provide a financial benefit, such as a discount on subway fares or housing, these tokens are not designed to be fungible currencies in the same way that cryptocurrencies are, but instead convenience tools to provide digital access to amenities.
That’s in contrast to initiatives like the one from Venezuela to create an oil-backed cryptocurrency called Petro, which many analysts saw as a convenient means to avoid U.S.-led sanctions on the Maduro regime. The Trump administration blocked the purchase of Petro last month.
Seoul is expected to announce a roadmap for blockchain in the coming weeks, and other cities are coming close to launching their own initiatives. The value bubble in cryptocurrencies may be receding, but their practical uses may well drive the next wave of innovation.