South Korean Financial Supervisory Service (FSS) is encouraging local regulators and financial companies to develop an integrated system for stock trading on the blockchain.
FSS has conducted a detailed analysis of blockchain technology used by operators on foreign stock exchanges: in particular, Korean supervisory authority is studying the experience with distributed registry technology in the US, Japan, Britain and Australia.
The FSS report notes that a blockchain-based system will significantly improve efficiency, integrity and security of tracking and registering stock purchase and sale transactions. The report also says that existing systems using centralized registries are not so effective and are subject to external attacks.
In the course of this research, FSS carefully studied experience of American stock exchange Nasdaq, which applies the technology to record transactions. The exchange uses their own system — the Nasdaq Linq.
Korea's financial regulator also explored the blockchain platform for stocks trading on the London Stock Exchange, and a similar system of Japanese trade consortium, consisting of 36 financial companies.
The most fascinating way to use revolutionary technology, according to FSS, was the example of the Australian Stock Exchange. They are preparing to completely replace their current system for clearing and settlement with an alternative based on a distributed registry.
The report says that blockchain use in Korea is still at an early stage, but FSS has committed to form a long-term program. They will continue to develop concept and pilot projects based on the blockchain, as well as study applications of this technology to the global market.
WHY IS IT IMPORTANT?
1. This week the South Korean government announced that under the new law, bitcoin-exchanges will no longer be eligible for corporate tax deductions, while authorities are also considering the introduction of a tax on income from cryptocurrency sales.
2. While tightening the rules for the crypto sphere, South Korea invests heavily into the development of blockchain. Last month, the Ministry of Science and Computer Technology of South Korea presented a development strategy for blockchain industry, allocating $9 million (10 billion Korean won). The funds will be used to develop a number of blockchain projects that emphasize advantages of the technology in several areas: international exchange of electronic documentation, logistics, real estate registration, online voting, customs clearance, agriculture and livestock.