The city of Busan announced its plan to establish a digital asset exchange within 2024. Last November, the Busan BDX Consortium and the gaming company Wemade threw their hats into the ring for the operation of the Busan Digital Asset Exchange. On February 21, Busan city signed a business agreement with the Busan BDX Consortium, thereby selecting it for the project.
The initiative to launch a digital asset exchange in Busan began in 2021, at the peak of interest in blockchain technology. However, the project faced skepticism following incidents like the Terra Luna crisis and the bankruptcy of the global cryptocurrency exchange FTX the following year. Despite these setbacks, Osaka Digital Exchange (ODX) in Japan launched its trading platform at the end of last year and commenced its first transaction on Christmas, December 25, while the Korea Exchange (KRX) has been gradually preparing for a digital securities market.
Tokenized securities represent a variety of tangible assets, including real estate, utilizing blockchain technology. They are securities that allow for dividends and interest earnings similar to stocks. Thus, aside from being digital, tokenized securities are not much different from traditional securities.
Interest in digital asset exchanges isn’t limited to the city of Busan and the BDX Consortium; various companies promoting fractional investments are also keen. In fact, KRX applied last year for a digital securities market, a regulated market for trading Security Tokens (ST), as an innovative financial service (within the financial regulatory sandbox), and in December, the Financial Services Commission designated the establishment of KRX’s new securities market as a new innovative financial service. This exemption allows for the trading of fractional investment products, previously only available in over-the-counter trades, on KRX, with the service launch planned for the first half of 2024.
KRX will establish a market for atypical new securities (investment contract securities, non-monetary trust beneficiary securities) within the stock market, offering services such as trading, listing, disclosure, and clearing and settlement through the stock market trading system. This means that securities based on a variety of assets can be traded on KRX, albeit in a different form than token securities.
Token securities are securities digitalized through distributed ledger technology based on tangible or intangible assets. Unlike cryptocurrencies like Bitcoin, which are not considered securities, token securities fall under investment contract securities or non-monetary trust beneficiary securities according to the Capital Market Act, meaning they are subject to related regulations. The Financial Services Commission has submitted amendments to the Electronic Securities Act and the Capital Market Act to the National Assembly to foster the development of this market, which are currently pending.
Unlike KRX, the city of Busan has thrown its hat into the ring with the name “digital asset exchange.” Digital asset exchanges are understood as evolved from computer-based electronic exchanges, utilizing blockchain technology. However, upon closer inspection, digital securities markets and digital asset exchanges appear conceptually similar, differing mainly in regulatory development. Internationally, various alternative exchanges already operate, indicating that the form of securities or the underlying technology is just different types of “food” in various “bowls.”
Unexpected new securities based on a variety of assets are being created. Last year, fractional investments and STOs became a theme in the securities industry. Investors are watching closely to see how this new trend evolves and what opportunities it offers.
Among these, the city of Busan has stepped forward to provide a trading platform using blockchain technology to offer trading services for a variety of underlying assets, especially in the form of tokenized securities, selecting Busan BDX for the project.
The leading company in the Busan BDX Consortium is ITCEN. ITCEN, known for its know-how in trading digital products based on tangible assets like gold, silver, and copper after acquiring the Korea Gold Exchange in 2018, has been preparing for blockchain-based digital trading. The BDX Consortium includes ITSEN, MainStreet Ventures, NHN Cloud, the production company behind the film Parasite, Barunson, the animation studio behind Pororo Icon, Hana Bank, Hana Securities, Optimus Blockchain Korea, and Withus Partners Korea.
The exchange will operate entirely through private investment, with BDX covering the costs of exchange facilities and owning the operation. The plan is to contribute capital in April and establish ‘Busan BDX Co., Ltd.’ within the Busan Blockchain Regulation-Free Special Zone by the end of the year.
The BDX Consortium has announced plans to utilize blockchain technology to tokenize and facilitate 24-hour trading of all valuable assets, including raw materials, precious metals, intellectual property (IP), and carbon credits. Optimus will support blockchain and metaverse technology, while NHN Cloud will manage system infrastructure and cloud operations. Additionally, blockchain platform companies such as EQBR, BPMG, and blockchain startup DSRV Labs will serve as technical partners. BDX aims to expand its business further, starting with mineral assets as digital assets, including cultural content such as film rights, and even large-scale SOC projects.
As numerous companies participate and securities based on a variety of assets are created, digital asset exchanges, security tokens (ST), and fractional investment securities markets are expected to evolve more rapidly. However, considering the unique information and trading formats required for various assets, unlike stock exchanges where company stocks or their portfolios are traded, the direction of market development remains uncertain.
It’s unclear whether comprehensive “stadiums” like BDX will become more active or if specialized “stadiums” for each category will move faster. Whether securities referred to as STOs, fractional investments, and digital assets will be concentrated in large “stadiums” like baseball and football stadiums or if smaller specialized “stadiums” like tennis or archery will become more active, or if both types of exchanges will coexist, is still unknown. However, one clear fact is that with the advancement of blockchain technology, small to medium-sized ventures can establish and operate their own exchanges if they have distinctive ideas and technology.
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