Blockchain Technology and Jeonse Fraud in an Era of Uncertainty

Jeonse is a distinctive lease arrangement in South Korea whereby tenants lend a substantial lump-sum deposit to landlords in lieu of monthly rent. This hybrid lease-loan agreement has recently become susceptible to increasing fraud, with landlords exploiting information asymmetries to misappropriate Jeonse deposits. In response, blockchain technology—specifically smart contracts—has been proposed as a potential countermeasure. Agains this backdrop, this study critically examines the viability of blockchain-based smart contracts in curbing Jeonse fraud, considering both their technical merits and institutional limitations. More specifically, we analyse the effectiveness of blockchain-based technologies in mitigating different types of Jeonse fraud, thereby highlighting their limitations amid uncertainties in information and legal frameworks. This study argues that, although such technologies may support fraud prevention under certain conditions, they neither generate nor regulate essential information and require corresponding reforms in the broader legal framework for their effective implementation. Furthermore, the inherent irreversibility of smart contracts can lead to unintended consequences by prematurely confirming erroneous or fraudulent transactions. This research provides new insights into blockchain-based solutions for Jeonse fraud by uncovering their institutional limitations, particularly in terms of information acquiring and the relevant legal frameworks. It further suggests that technological remedies should be complemented by societal efforts to produce essential information and to promote legal reform.