Seven regulation-free zones are established nationally, including Busan of blockchain. These seven zones will have opportunities to develop new technology and new business without regulatory limitations.
In the case of Busan, it is planning to launch various blockchain-based services. However, the government has made it clear that any types of cryptocurrency or ICO will not be allowed. The regulation-free zones are expected to last four to five years. The government has emphasized that they are “The first regulation-free zone designated in the world.”
The seven regulation-free zones are as follows: Gangwon (Digital Healthcare); Daegu (Smart Wellness); Jeonnam (e-Mobility) Chungbuk (Smart Safety); Gyeongbuk (Next-Generation Battery Recycle); Busan (Blockchain); and Sejong (Automatic Driving).
On July 24, MSS has announced that the Regulation-Free Zone Committee held a meeting chaired by Lee Nakyeon, the prime minister, to designate the seven regulation-free zones.
The seven regulation-free zones designated this time will be free from a total 58 regulations, including 49 special cases of regulatory exceptions and nine special cases of ‘menu system regulations.’
Although a total of eight candidates including Ulsan advanced to the final review stage, Ulsan’s designation is postponed for now. Although Ulsan qualifies in terms of the industrial importance and the growth possibility, prototypes of proposed products like hydrogen-fueled robots still need to be developed before being designated as a regulation-free zone.
The government will support the upgrade of a prototype, acquirement of patent, sales, and exports for local companies, universities, and research institutes in the zone. Also, there will be tax supports so that more companies can be invited into the selected zones.
MSS is planning to establish and operate the ‘Regulation Free Zone General Control System’ which will manage regulatory sandbox so that projects can expand beyond regulation-free zones. MSS believes that the designation of seven specialized zones will cause 7 trillion KRW of sales, 3,500 employments, and 400 cases of corporate invitation while the zones are in effect.
■ Busan
Busan will become a ‘city of faith’ as it plans to provide services based on blockchain technology.
The off-chain will be the primary technology in the case of Busan. In an off-chain, information is not directly recorded the blockchain but saved in a secure server. The hashed location value of the information within the server is recorded in the blockchain.
The blockchain technology will be applied to services such as digital local currencies, history managements of seafood, and tourism services.
■ Follow-up Supports for Companies in Regulation Free Zone
The corporate supports such as funding and commercialization, will be enhanced to create a better environment for the participating companies.
MSS plans on providing R&D supports to the local companies, universities, and research institutes. There will be commercialization supports. It will provide various supports such as upgrading prototype product of the participants, patents, market pioneering, and helps to enter overseas markets.
Also, the newly founded companies in the zone shall take supports connected to ‘the second venture boom’ policy. There will be opportunities for VC connections, special guarantees of scaleup, and TIPS program. It will be the bedrock for finding and promoting startups of new industries such as bio and big data.
■ Differences compared to Other Regulatory Sandbox
The four big regulatory sandboxes (Industrial Fusion, IT Technology, Financial, and Regulation Free Zone) in general have a total of three processes; special case verification; temporary approval; and rapid confirmation.
However, the regulation-free zone is easing major regulations as a package in the selected area to support new industries. In the case of regulatory sandboxes, projects would have a regulation chosen and proposed to the government. Besides, the regulatory-free zone includes financial supports of budgets and taxations.
■ Cryptocurrency excluded in Busan Blockchain Zone
MSS has announced that cryptocurrency would not be allowed in the Busan zone. They said that the Busan Digital Voucher (digital local currency), which would be developed on blockchain technology is not a cryptocurrency. It would only be an electronic prepaid payment tool, following Electronic Financial Transaction Law, strictly based on legal tender.
The electronic prepaid payment tool is the same as the electronic currency. However, there are differences in terms of the value exchange and the payment guarantee. In the case of Busan, Busan Digital Voucher will be exchangeable and guaranteed with Korean Won.
This allowance on electronic currency was guaranteed provided that it will only conduct the businesses directly related to the tourism in Busan.
■ Period
The period designation has no limit under the Law on specialized zone. However, it may be adjusted through a screening process. The designated period is four to five years on average.
Following the Law on specialized zone, the expiry of special verification case and temporary approval shall be designated within two years, and one-time renewal will be allowed if further legal adjustments are not provided.
The renewal of special verification case and temporary approval must be submitted to Minister of SMEs and Startups through local governors, two months before the expiry.
However in case of temporary approval, if it is still not otherwise provided during the renewed two years of period, the expiry is regarded to be extended until the legislation is provided, which seems to be supporting the efficiency of the system of the specialized zone.
■ Effects
The participating companies shall be applied to the special cases of regulations, and fund support and taxation benefit are available.
The three regulatory innovation benefits (rapid confirmation, temporary approval, and special verification case) with menu system special case of regulation will be applied. Also, the autonomous selection and application for the special case of regulation are available to the relevant area from the 201 regulations on the menu other than the regulatory sandbox.
It is possible to invite corporations after the designation of the specialized zone as well as the substitution of an existing company in the zone, pursuant to the Law on specialized zone.
However, the participation of newcomer shall be reviewed by the specialized zone committee through an application of the relevant local government because it is subject to be the alteration of the specialized zone project.
■ Follow-up plans
The safety measure is prepared by imposing safety securing conditions through a review of the relevant offices when granting the special case of verification.
During the operation period, the granted special cases may always be canceled when there is any problem found from the spot check to manage and supervise strictly. The compensation responsibility is strengthened such as suspension of special cases when there is any concern of lives and safety of people and environment, cancellation of special cases when there is any problem occurred, and verification responsibility transfer (victims → business owners).
Especially, the damage compensation level will be relatively higher than usual, as well as the consumer damage compensation device will be established and operated. Also, the regular and frequent inspections on operations of the special cases by consisting of the join inspection squad of MSS, the relevant offices, and experts.
Overall verification of special cases such as safety verification under the application of new technology, the application of the special cases, and verified technology developments will be regularly checked once a year (November), and anytime if required.
‘Regulation Free Zone General Control System’ for general management from the applications to the reviews of the regulatory sandbox, will also be established and operated. This will generally manage the follow-up result data such as supporting status and sales, employment, and corporate invitations by project.
■ Selection Standards
The regulation-free zone has selected businesses of a significant ripple effect which may lead the innovative growth of local communities. The business preparations based on local infrastructure, regulatory sandbox, and connectivity to other specific businesses were all considered by the committee.
Also, it has given priority to the businesses such as the business which the prompt commercialization after the completion of technology development, and the business that requires special case verification for its commercialization, to be distinguished from the existing R&D businesses.
There were seven specific evaluation standards such as ①Utilization of the local characteristics & conditions, ②innovation & growth possibility, ③necessity of regulation special case, and ④economic effects.
Bang Eunju (2019.07.25.) 부산 블록체인 등 규제자유특구 7곳 지정
Zdnet Korea, retrieved from https://www.zdnet.co.kr/view/?no=20190724115553
