This year, the blockchain industry has grown meaningfully in that Bitcoin, a cryptocurrency leader, has clearly established itself as an alternative investment asset. As the world monetary authorities released money to the market to overcome the corona 19 economic crisis, increased concerns about inflation triggered a re-evaluation of Bitcoin as an alternative investment asset. Popular fintech companies such as PayPal and Square, as well as asset managers from traditional financial sectors, played a role in growing the market by jumping into the bitcoin investment field.
On the other hand, in terms of blockchain services, it was regrettable that it did not produce revivable results in the early year’s expectations that this year will be the first year of popularization. There was high expectation that conglomerates with financial power and user bases such as Facebook, Samsung Electronics, Kakao, and Line would lead the popularization of blockchain services, but they were blocked by a regulatory wall and could not easily conduct business.
There is a growing awareness that it is necessary to prepare an appropriate legal system to deal with the blockchain cryptocurrency industry as a whole.
Bitcoin establishes itself as an alternative investment asset
This year, Bitcoin has emerged as a definite alternative investment asset after the economic crisis triggered by the Corona 19 crisis. Until last year, it was regarded as a speculative asset with high price volatility, but this year, it was reevaluated as it showed a strong aspect in the economic crisis.
Since the beginning of this year, countries around the world have maintained zero interest rates and implemented quantitative easing policies to respond to the economic downturn caused by the spread of Corona 19.
When the money line is released and the number of currencies circulating in the market increases, the value of the currency inevitably decreases. Concerns over inflation have led to interest in Bitcoin, which is compared to’digital gold’. As Bitcoin issuance is set at 21 million, there is a growing expectation that it can act as a safe asset like gold.
Real companies and institutional investors are sensitive to changes in the investment environment and have begun to enter the bitcoin investment market. A prime example is MicroStrategy, an American enterprise software (SW) company. The company invested about 1.2 trillion won this year to buy 7,470 bitcoins. Michael Shaler, CEO of MicroStrategy, commented on Bitcoin investment as “a reflection of our belief that Bitcoin is a reliable store of value and an attractive investment asset with the potential to increase value over cash reserves in the long run.” I also revealed it.
The bitcoin trust product operated by the asset management company Grayscale has grown to 17 trillion won as institutional investors continue to participate. US life insurance company’Mass Mutual’ and hedge fund’Skybridge Capital’ are also known to have purchased 110 billion won and 27.5 billion won worth of bitcoin, respectively.
In a recent online seminar, Seo-joon Kim, CEO of Hashed, a blockchain investor, said, “If you look at the Sharpe ratio, which represents the risk-to-return ratio, bitcoin has produced more stable returns than gold or stocks.” According to the analysis that the Sharpe ratio increases when ordering, institutional investors are increasingly interested in Bitcoin.
As global fintech companies PayPal and Square launched a bitcoin trading service through a simple payment app, an environment where individual investors can easily invest in bitcoin has also been created. According to a recent report released by Fintera Capital, 800 to 900 bitcoin purchases occur every day from PayPal and Square. It is absorbing almost 100% of bitcoin newly introduced into the market through mining.
Based on this background, the price of bitcoin rose more than 270% in one year from about 8.4 million won in January to 31 million won as of the end of December. It showed a gentle upward trend throughout the year, and after it entered the 20 million won range in three years on the 18th of last month, the upward trend accelerated. After that, it took only 40 days to enter the 30 million won for the first time in history.
Popularization of long-awaited blockchain services…regulation risks ankle
Excluding the investment market centered on Bitcoin, the overall domestic and foreign blockchain industry has not escaped the recession.
Following last year, block-chain start-ups that have closed their business or are virtually closed have emerged. In addition, conglomerates that were expected to lead the popularization of blockchain services ended the year with no such achievements.
In February of this year, video streaming company Watcha announced that it would suspend its own blockchain project’Content Protocol’, which gave a considerable impact to the industry. The content protocol has been evaluated as a case of grafting a block chain on top of the existing Watcher service and has high potential for business realization.
Watcha said that the reason for organizing the content protocol business at the time was’failure of business strategy’ and’cryptocurrency regulation and negative perception’. “There was a risk that it was difficult to attract general content consumers’ participation due to value volatility and complex usage procedures, and there was also a risk that it was unclear when legal regulations and accounting guidelines for cryptocurrency were established.”
The digital asset wallet service clip, launched by Kakao’s subsidiary Ground X in June, is also struggling to activate the service. As the clip was installed on the national messenger KakaoTalk, it raised great expectations as a service that will accelerate the popularization of the blockchain. On the day of the actual launch, it had a smooth start with over 100,000 subscribers.
However, there is a message from the industry that there has been no performance in terms of subscriber growth or service revisit rate (retention) since then. The biggest problem is the lack of blockchain services that can be used to access the wallet. Due to the downturn in the industry, it is difficult to find a blockchain service to be recruited as a partner, and the risk of cryptocurrency regulation remains, so it is not in a situation that Ground X, a subsidiary of Kakao, can aggressively conduct events or promotions using its own cryptocurrency clay.
DM (formerly Libra), a global digital currency project led by Facebook, is also in a situation where it cannot even launch for more than a year and a half due to the checks of global financial authorities.
As a result, as the blockchain industry continues to stagnate due to regulatory risks, the emergence of tangible blockchain services has become a task that the industry must solve in the new year.
Progress has been made in the area of using blockchain as an element technology. Representatively, many countries around the world are actively reviewing the issuance of central bank digital currency (CBDC) and applying blockchain as a base technology. In addition, blockchain-based distributed identification (DID) technology has been actively introduced to digitize identification cards and diversify authentication methods. However, this is a solution construction project that uses blockchain as an element technology, and is far from the industry goal of revitalizing the blockchain service ecosystem.
Voices of the Enactment of the Business Rights Act to Create a Basic Industrial Order Increase
Blockchain in Korea this year·The legalization of the cryptocurrency industry took its first step. With the passage of the revised Specific Financial Information Act (Special Act), it was decided to implement the’Virtual Real Estate (cryptocurrency) business reporting system’ from March of next year. I decided to charge a percent tax.
However, it is still a difficult environment for blockchain companies to stably conduct business. Both the Special Money Act and the cryptocurrency taxation are regulatory laws that require certain obligations to be fulfilled, and the basic regulations necessary for the entire industry, such as issuing, providing, trading, and protecting investors, are still not legislated.
Accordingly, industry opinions are gathering that it is necessary to establish a business rights law that covers the entire cryptocurrency industry and lay a foothold for industrial growth.
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Rep. Kim Byeong-wook, who led the enactment of the Special Money Act, participated in the’National Assembly Seminar for the Enactment of the Virtual Box Industry Rights Act’ held in September and contributed his strength. Rep. Kim said, “If the revised bill of the Special Funds Act is implemented, we expect that the view of concern about virtual assets will be eased,” and “The legal system for the sound development of virtual assets and related industries and the protection of investors and users of virtual assets without stopping by the Special Funds Act. We need to worry about the arrangement,” he stressed.
Lee Seok-woo, CEO of Doonamu, the operator of the cryptocurrency exchange Upbit, also met with reporters through an online conference on the 27th of last month, saying, “Only when the Business Rights Act comes out (blockchain) will the industry become industrial and grow. I hope that this will be actively implemented and clear standards will be established soon.”