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Stiglitz advises Seoul against easing financial regulations
Columbia University professor Joseph Stiglitz, right, responds to questions from Dongkuk University professor Kang Kyeong-hoon during an online meeting during the 2021 Seoul International Finance Conference, Thursday. Screenshot from YouTube
By Park Jae-hyuk
Nobel laureate calls for ban on cryptocurrency transactions
By Park Jae-hyuk
Nobel Prize-winning economist Joseph Stiglitz emphasized the necessity of regulations for Seoul to attract more foreign investment.
In contrast to the view prevalent among private financial companies that the city's tough rules have blocked its growth into a global financial hub, the former World Bank chief economist sided with the Korean financial authorities that have remained cautious about relaxing regulations.
“It becomes even more important for Seoul to step up to be one of the critical financial hubs, and to open a transparent, well-regulated financial hub for Northeast Asia,” he said in a keynote speech for the 2021 Seoul International Finance Conference, Thursday. “I believe that kind of transparency and good regulation will lead to innovation, the kind of innovation that leads to a financial system that has value-added for society.”
Korea's previous experience during the 1997 Asian financial crisis was cited as a reason for his claim.
“Korea had good regulations, regulating capital flows in-and-out of the country,” he said. “Then unfortunately, under pressure from the OECD and the U.S. Treasury, it scrapped those regulations in the early 1990s. Capital flowed into Korea, and then when sentiment changed, it flowed out.”
The Columbia University professor also mentioned the cases of New York and London to support his claim that their financial deregulatory measures encouraged illegal practices including tax evasion, eventually causing the 2008 financial crisis that dealt a severe blow to the entire global economy, not only to the financial hubs themselves.
From that standpoint, Stiglitz reiterated that regulators all over the world should basically shut down cryptocurrencies, as he has argued over the past few years.
“My view is that digital currencies do not add anything economically to our society,” he said. “They are becoming significantly important in terms of undermining the basis of our financial system, the transparency of our financial system. All the bad activity can go through the cryptocurrencies, and they are now becoming politically significant. They are beginning to lobby to continue their socially dysfunctional activity.”
The economist also supported regulations on digital platform operators that entered the financial industry, expressing skepticism about the possibility of fair competition in the markets they lead.
He warned that platform operators may intensify discrimination against underprivileged people by using their vast amount of collected personal information to categorize those who do not have any alternative options.
Financial Supervisory Service Governor Jeong Eun-bo, front row fourth from left, and Seoul Mayor Oh Se-hoon, front row center, applaud with participants in the 2021 Seoul International Finance Conference at Conrad Seoul, Thursday. Courtesy of Seoul Metropolitan Government
The Financial Supervisory Service (FSS), which jointly hosted the event with the Seoul Metropolitan Government, agreed with the necessity of regulations on tech firms offering financial services.
“FSS will pay attention to global discussions on fair competition between conventional financial firms and big tech companies,” FSS Governor Jeong Eun-bo said in an opening speech. “We will also make efforts to establish Korea's own system to regulate big tech firms.”
Financial Services Commission Chairman Koh Seung-beom also said during his meeting with commercial bank CEOs on the same day that the government will make efforts to create an environment for fair competition that does not allow “regulatory arbitrage” unreasonably favorable to tech firms.