[Economy Pulse] Memories of the Cityphone and the Future of Digital Finance

Readers in their 40s or older may remember the emergence of the "Cityphone" around 1997. Watching people take out their Cityphone to make a call next to lines at public phone booths was once a symbol of cutting-edge technology. However, this half-baked service, which only allowed users to make calls within designated zones but not receive them, vanished from the market within just a few years after the rapid popularization of fully bidirectional mobile phones. In retrospect, it is puzzling why such a product was even developed, yet at the time, Korea Telecom—a de facto public institution—was touting it as a promising business. This serves as a painful lesson in the cost of failing to recognize sweeping technological trends.

Recently, Korea's digital finance policy brings a strong sense of déjà vu reminiscent of the Cityphone era. The global financial ecosystem is currently being rapidly reshaped, driven by stablecoins and real-world asset (RWA) tokenization. The very essence of blockchain is that, through cryptographic technology, the "internet network" can be transformed into a "financial network" capable of transferring value. As a result, the monopoly that Visa and SWIFT once enjoyed—having invested astronomical sums to build closed global networks for payments and remittances—is facing its first structural challenge.

This seismic shift is already evident in the numbers. The global stablecoin market has surpassed 320 billion dollars, establishing itself as a core means of cross-border payments and on-chain finance. The market for tokenized U.S. Treasury bonds has also expanded to around 10 billion dollars. Major global asset management firms such as BlackRock and Franklin Templeton are operating funds worth hundreds of millions to billions of dollars on public blockchains. Meanwhile, the U.S. Depository Trust & Clearing Corporation (DTCC), which safeguards more than 114 trillion dollars in assets, is also accelerating its shift toward tokenization infrastructure in collaboration with global financial institutions.

In contrast, Korea’s reality is out of sync with global trends. The Bank of Korea is heavily focused on experiments centered on public infrastructure, such as Central Bank Digital Currency (CBDC) and deposit tokens. However, efforts to institutionalize a won-based stablecoin that would be directly connected to global liquidity have stalled. This is not to say that experiments with CBDCs and deposit tokens are unnecessary. The problem arises when these experiments are used as justifications to delay the on-chain transformation of finance.

The Digital Asset Basic Act, which the ruling party and financial regulators had pledged to enact in the first quarter of this year, has been delayed indefinitely. Security Token Offerings (STO) are also on the verge of being introduced with amendments to the Capital Markets Act, but in reality, business activities are still limited to fractional investments in irregular assets like real estate and artworks on closed distributed ledgers led by domestic financial institutions. While we turn a blind eye to the essence of blockchain and build yet another "closed intranet," overseas exchanges are swiftly absorbing global liquidity by releasing tokenized products based on Korean stocks such as Samsung Electronics and SK hynix, as well as ETFs containing these stocks, supporting 24-hour trading. As we lose the initiative, the fruits of innovation are flowing entirely to foreign operators.

Leading advanced countries have long since shifted to a "Two-Track" strategy. The United States, for example, has limited the push for a federal-level retail CBDC and instead institutionalized dollar-based stablecoins, positioning private-sector innovation as a pillar of national competitiveness. Japan has allowed the issuance of stablecoins since June 2023, and the European Union has incorporated stablecoins into the regulatory framework through the MiCA law since 2024. Notably, the Monetary Authority of Singapore (MAS) has led innovation by successfully tokenizing government bonds on a public blockchain—not a closed network—in real transactions with major global banks like JPMorgan and DBS through "Project Guardian" as early as 2022. This illustrates a clear division of labor: while the central bank is responsible for public payment infrastructure, securing global liquidity and fostering private-sector financial innovation are entrusted to transparent, well-regulated open ecosystems and market choice.

Of course, borderless on-chain finance comes with risks such as anti-money laundering (AML) challenges and foreign exchange management difficulties, so careful consideration is necessary. However, excessively delaying innovation simply because it is difficult to control is not a strategy. The role of regulators should be to manage risks through sophisticated regulations, such as 100% reserve proof, real-time disclosures, external audits, and redemption rights. As history shows, when new technologies emerge, it is an open attitude that respects market choices—rather than hastily defining the future—that determines national competitiveness.

The global financial industry is now being reorganized on-chain based on blockchain technology. If Korea’s digital finance wastes precious time creating "yet another Cityphone" within our own closed network, what will happen? The lessons of the Cityphone and WiBro are clear: a state-defined standard that the market ignores can never become the future. If we miss this golden opportunity, Korea may never find its place on the global digital finance map when we arrive late to the game.

Seo Byungyoon, Co-CEO of DSRV Labs