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[ETNews] K-Token User Protection, A Must, Not A Choice.

전자신문 2023-12-05 K-Token User Protection, A Must, Not A Choice.

<김봉규 한양대학교 공과대학 겸임교수(Ph.D.)>
<Bongkyu Kim, Adjunct Professor, College of Engineering, Hanyang University (Ph.D.)>

Expectations for the token economy are growing. Leading the way are the Bank of Korea's Central Bank Digital Currency (CBDC) and token securities (STs), which are emerging as the next big thing in the capital market.

However, despite the excitement, there are also concerns about the possible privacy violations of blockchain-based digital asset transactions. Many research papers have argued that "user protection" can be the key to user activation when trading digital assets.

In September, the Board of Governors of the U.S. Federal Reserve System issued a report, Data Privacy for Digital Asset Systems, in the Financial and Economic Review, which laid out the following strategic direction. It recommended that digital asset systems need a privacy strategy that prevents the use of user information along with transaction history to identify individuals, and that a strategy should be developed that combines technical approaches, such as utilizing privacy-enhancing technologies, and policy approaches, such as establishing a system to securely handle personal information.

Subsequently, the BOK said that it plans to identify appropriate technologies and establish policies from the beginning of the system design by staging the flow of personal information into collection, use, storage, and destruction by distribution process in the BOK's CBDC utilization test, assuming that the characteristics of CBDCs are similar to digital assets issued and distributed in digital systems. This means that the Bank of Korea will reflect the privacy strategy proposed by the U.S. Federal Reserve report in the introduction of the Bank of Korea CBDC, showing that the Bank of Korea's concern for user protection is progressing from the early stages of system construction.

Many countries preparing for CBDCs, including international organizations, consider user protection measures to be a necessity rather than an option, and are continuing research on it. In particular, it is a realistic fact that it is difficult to pass the EU's General Data Protection Regulation (GDPR) if privacy measures are insufficient for cross-border transactions such as W-CBDC.

User protection can be broadly categorized into 'user asset protection' and 'user privacy protection'. In fact, these are both sensitive areas of privacy that the average user cannot afford to give up. Fortunately, privacy-enhancing technologies have made a lot of progress in the world, and technologies that support identity authentication, fund authentication, information storage, and auditing are already available, and significant advances in throughput and performance are now expected. Therefore, in the future, if a K-Digital Asset service that reflects an ideal privacy policy based on these technologies is released, it will definitely serve as a competitive advantage in the global market and provide a good opportunity to become a first mover in the global token economy.

In particular, the K-CBDC and K-Token securities business, which are currently being prepared, will be a good opportunity to enhance the global branding of the K-Token economy. Therefore, as the global token economy is about to blossom, it is hoped that Korea will take the lead in leading and creative experiments and become a major player in the global financial industry paradigm change that may come again.

Bongyu Kim, Adjunct Professor (Ph.D.), College of Engineering, Hanyang University

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