As South Korea looks ahead into the next five years under the new Yoon Suk-yeol administration, the fourth-largest economy in Asia finds itself at a critical juncture with the inevitable advent of the second era of the digital age based on blockchain technology.

Don Tapscott, a leading thinker on blockchain, said in an interview with The Korea Herald that he believes Korea can be the next Silicon Valley if the country has the right national blockchain strategy and a good regulatory environment.

“You have a great educated population. You have great computer science. It’s not fully into this area yet but it could be. You have wonderful entrepreneurship that’s happening right now. You have huge, massive corporations that are very strong in technology that are starting to show interest in this technology,” he said.

“You think Korea did well in the first era of the digital age? Korea could be infinitely more successful in the second era if you can find the leadership to do it, and it’s very exciting that you have a new president.”

President Yoon, who took office on May 10, plans to build a digital platform government which requires total integration of high technologies including artificial intelligence, big data and blockchain to simplify all public services. The new president has pledged to give some breathing room for digital assets. They include raising the tax deduction on profits from digital assets from 2.5 million won ($1,900) to 50 million won, and allowing initial coin offerings. He has also promised a basic law on digital assets and foster the digital asset market.

Tapscott, however, suggested looking at the bigger picture, saying that blockchain technology could change the government’s ability to collect and manage taxes, and perhaps, revolutionize “the nature of democracy.”

Given the transparent nature of blockchain, which has a mechanism that makes it almost impossible to manipulate the system, Tapscott said the technology allows safe electronic voting and lets people vote not for politicians, but for their campaign pledges.

In the case of blockchain-based e-voting, it would make politicians more accountable, as their promises would be stored in data on the blockchain network of voters for simple access that cannot be tampered with.

If payroll is on a blockchain, its smart contract would automatically calculate the tax and send it to the government, he explained. In doing so, it eliminates fraud regarding payroll taxes, and transforms the operation of the government.

“You have a crisis like a pandemic. You need to give money to everyone in the population. You helicopter-drop it onto their mobile devices.”

The expert also recommended that the Yoon administration set up a task force to create a digital fiat currency -- the digital won.

“China is doing this. Its central bank digital currency is being rolled out across Southeast Asia, into Africa across the One Belt, One Road initiative. If this continues at the rate it is, its digital currency called the DCEP (Digital Currency Electronic Payment) will replace the US dollar as the currency of record,” he said.

According to Tapscott, the digital won would allow transparency as the blockchain operates as a shared digital ledger that facilitates the process of recording transactions. Therefore, data is safely stored in a common network.

Although he underlined the importance of having a digital fiat currency for Korea, Tapscott dismissed Twitter co-founder Jack Dorsey’s idea of bitcoin eventually replacing the US dollar. Fiat currencies are backed by the power of the state, and the powerful authorities of state -- such as controlling variables in the economy -- will remain for the foreseeable future, he said.

Noting the case of China, which is building several hubs dedicated to advancing the blockchain ecosystem with billions of dollars, he advised the Korean government to build a blockchain hub by investing in blockchain innovation with the private sector.

He said that blockchain has applications in all sectors, and is capable of transforming companies such as Samsung, Hyundai or LG and also financial companies like KB Financial Group by revolutionizing the way supply chains and services work.

“This is not just about digital assets. That’s one of many more profound changes that are happening,” he said. “Don’t just think about building crypto assets. Don’t even think about building a blockchain platform. Think about the infrastructure for this technology. For transforming supply chains or transforming manufacturing or transforming all the different elements of financial services.”

The Korea Herald interviews Don Tapscott via online video conference at the Herald Square on April 28 in Seoul (Kim Su-hyeon/The Korea Herald)

Danger of crypto volatility, metaverse monopoly

Regarding the market frenzy around cryptocurrencies and questions remaining over their extreme volatility, Tapscott said, “It is a bubble in the sense that it’s way down right now and so is the stock market ... It sort of parallels the stock market. You know crypto is an asset class, at least in North America.”

The tech guru, however, warned of crypto investors fantasizing about becoming rich quick by investing in all they have.

“Of course you need to be cautious. Of course, this will be very volatile,” he said.

“No one reading this or listening to this should, if they are, you know, a very poor person, take their hard-earned savings and go on put it all into crypto,” he said. “But there are a lot of misconceptions around this as an investment opportunity.”

Regarding the recent metaverse rush, the expert said that blockchain technology is what enables people to have real currency in the virtual world.

“The metaverse was an idea in waiting. It was an idea whose time had not come. And it was waiting for blockchain because with blockchain in a virtual world you can have a real currency now. You can have NFTs that represent digital goods like a car or a piece of art or a farm whatever.”

He added that if the metaverse is done right, it can let the people who generate data own it, and allows it to teach us a lot about creating a self-sovereign identity in the physical world. But he warned against the development of a metaverse monopoly.

“There are many problems. Will it be a very hierarchical environment? Will it be sexist? Will Facebook run it? In North America and in the western world, if Facebook runs the metaverse, that’s a very frightening idea. We need a decentralized metaverse where people can own their own data.”

Born in 1947, Don Tapscott founded the Blockchain Research Institute, a global think tank funded by a consortium of international corporations and government agencies, and now serves as the executive chairman at the institute. He and his son Alex co-authored the international bestseller “Blockchain Revolution: How the Technology Behind Bitcoin and Other Cryptocurrencies is Changing the World” in 2016, which has been translated into 20 languages.

Tapscott has been writing, lecturing and consulting about the rise of technology and its impact on communications and commerce for more than 30 years. From 2013 to 2019, he served as chancellor of Trent University in Canada. He has written 17 published books and sold over 5 million copies so far. His TED Talk, titled “How the blockchain is changing money and business,” is the most-watched video about blockchain in the world, with over 7 million views. He is also a keyboardist, harpist and vocalist in the six-member Men in Suits, a Toronto-based band of business executives.

This interview was conducted on April 28, before President Yoon was sworn in. -- Ed.