The South Korean city of Busan’s plans to launch a city-run, blockchain-powered digital assets exchange may be in peril, a report claimed on April 24.
Per Naeil Shinmun, the project is “showing signs of trouble” after effectively delaying its official launch.
Busan Digital Exchange Hit With Launch Delay
Busan’s digital asset exchange plans have been in the pipelines for some time, but have already been beset with issues.
The city initially wanted to become the first in the world to launch a crypto exchange. However, this plan hinged heavily on promised changes to central government policy that have yet to materialize.
Initial coin offerings (ICOs) have been outlawed in South Korea since 2018. And while successive governments have promised to review the ICO ban, it remains firmly in place.
This, and high-profile crypto scandals, have left the domestic crypto sector in limbo. Busan initially hoped to create and then sell off the exchange to private sector firms.
After ditching plans to list conventional cryptoassets, the city announced it would instead list assets such as tokenized real estate, intellectual property rights, carbon emissions rights, and tokenized commodities.
However, in recent times it has stated that the exchange will instead initially focus solely on tokenized precious metals.
🇰🇷 The South Korean won has emerged as the leading fiat currency for cryptocurrency trading, overtaking the US dollar in Q1. #SouthKorea #Wonhttps://t.co/hTRcUJVErP
— Cryptonews.com (@cryptonews) April 17, 2024
Payment Problems Blight Project?
Busan City and an operating firm named the BDX Consortium signed a business agreement on February 21, pledging to “launch and operate a digital asset exchange.”
But Busan city authorities confirmed on April 24 that the consortium failed to make a scheduled $7.3 million equity capital payment.
This means the consortium is effectively “breaking its promise to establish a corporation within 60 days of [February’s] agreement,” the media outlet noted.
Busan’s Haeundae Beach. (Source: Hajo Schatz [CC BY-SA 2.0])
The terms of the agreement stipulate that the consortium “must establish an exchange business called Busan BDX” in the city and complete the payment in the specified period.
The consortium reportedly filed for corporate registration and appointed a CEO and a board of directors. But, the city said, it failed to pay by the April 22 deadline.
The city noted that the corporate registration process cannot be completed without the equity payment.
This Is Not a Delay, City Claims
However, Busan has reportedly not yet decided to terminate its agreement with the consortium, hopeful that the group will come up with the money.
The consortium comprises 11 companies, who appear to have told Busan officials they will pay the bill by the end of May.
The media outlet noted that this would mean a further delay to the launch was “highly likely,” as the operator could not yet hire employees, build a platform, or train staff.
Busan previously claimed its exchange would be operational before the end of 2023.
However, the city began its public offering process late, and has since been forced to revise its timeline.
Busan police on Thursday arrested the operators of an illegal website that offered illegal gambling services mostly for teenagers, run primarily by teenagers.https://t.co/HPyERzZfh4
— The Korea Herald 코리아헤럴드 (@TheKoreaHerald) April 18, 2024
Busan’s initial plans included crypto trading, as well as “real-world goods and products on blockchain networks.”
An official from the Justice Party’s Busan branch criticized the city authorities handling of the project, calling it “ineffective.”
However, a Busan City spokesperson was more optimistic, telling media reporters:
“As there are many restrictions […], we have decided to start trading [tokenized] precious metals at first and gradually expand the scope of the project. People shouldn’t think of this as a delay, but as a process of trial and error. This is the first time [a city] has tried to launch a business of this nature.”
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