Where does South Korea Stand on ICOs?
February 4, 2019 12:13 pm
South Korea Still Wary of ICOs
The current week saw South Korea’s decision to continue the ICO ban in the country, an effort which could prove to be beneficial for other big crypto markets in Asia.
The virtual currency task force of the office for Government Policy Coordination released a comprehensive report regarding the ICO market. According to local financial authorities, the current ICO model is risky and unreliable in the government’s eyes. Hence, the ban on domestic crypto token sales stays intact.
On referring to the existing policies in South Korea, the local investors are allowed to participate in international token sales. Over the course of 12 months, the government revealed that many firms carried out unfair practices, abusing the regulatory loophole by establishing paper companies in the international market.
South Korean firms created entities in regions like Japan and Switzerland for conducting coin offering, in an attempt to evade the stringent ban on local ICOs. These firms could still encounter regulatory issues in the home country if they target local investors.
The Office for Government Policy Coordination, in its recent report, revealed that around 22 domestic firms have started token sales outside the country.
According to the government’s estimation, the local companies have approximately collected $500 million in the last two quarters of 2017. The country’s virtual currency task force said:
“Even though these firms raised tens of millions of dollars from ICO, the majority of the companies failed to transparently disclose how the funds were used and refused to cooperate with the government.”
ICO Scandals and Exit Scams Cause Chaos
The local crypto exchange is being investigated following the country’s largest crypto scam and scandals including minor cryptocurrency trading platforms.
After many failed token sales and exit scams, the majority of the industry favored a strict regulatory framework to protect investors.
Nevertheless, the chairman of the National Policy Committee, Min Byung-do said that the government should target money laundering and fraudulent projects without affecting the root of the industry.
“The government has to leave the door open for new business models while cracking down on money laundering and speculations with stricter policies. It cannot, however, completely eliminate the root.”
South Korea Misses out on Opportunities Worth Billions
The country with ICO ban could miss out on the multi-billion dollar industry. Some of South Korea’s most prominent companies including Kakao had planned to conduct crypto token sales.
But with the ICO ban, the company is reportedly launching a private token sale in Japan, which could very well be worth millions of dollars.
In the wake of a nation-wide ban on ICOs, South Korea is turning its back on promising projects that could prove lucrative for the nation’s economy.
But, it is also essential to take account of security measures to preserve the protection of investors. In the face of such a conundrum, a suitable regulatory structure is necessary for allowing new business to thrive without any security compromise.
Read more about Initial Coin Offering here