South Korea’s Financial Services Commission (FSC) has announced a ban on all token offerings, popularly known as “initial coin offerings” (ICOs), in the country. This follows deliberations by a task force comprised of personnel from various government agencies, including the Fair Trade Commission, the Office for Government Policy Coordination, the Ministry of Strategy and Finance, the Ministry of Justice, the Korean Communications Commission, the National Tax Services, the National Police Agency, the Bank of Korea, the Financial Supervisory Service, and the Korean Internet Development Agency.
FSC vice chairman Kim Yong-Bum made the announcement, explaining that according to the task force’s findings, token offerings represent a significant fraud risk.
A translation of the press release issued in addition to Kim’s verbal statement described the act of “financing using virtual currency in the form of securities issuance as [a] violation of the capital market law” and warned of unspecified “stern penalties” for those who violate the ban.
In a translated version of his statement, Kim was quick to defend the move by claiming that it was not intended to inhibit business growth. He advised industry players that “If it is a normal company with technology, it can raise money through transparent methods such as stock openings and crowdfunding. The ICO prohibition should be viewed in terms of investor protection rather than impeding industrial development.”
Kim Hyung-Joo of the Korea Blockchain Industry Promotion Association disagreed, opining that blockchain technology will be the basis for the “fourth industrial revolution in Korea,” and calling the government’s attitude towards cryptocurrency “not appropriate,” according to a translation of his comments. Kim Jin-Hwa, co-founder of the South Korean cryptocurrency exchange Korbit, a 65 percent share of which was recently purchased for the equivalent of roughly $80 million, predicted that the move would curtail domestic investment.
The press release also reported that beyond implementing the ban, certain members of the task force would continue to monitor the trading of cryptocurrencies in order to determine whether such activity should be regulated. It said that, in addition to enabling fraud, virtual currencies play a role in the drug trade, citing a cannabis sale this past January that was transacted via bitcoin.
South Korea is not the first country to announce such a ban. On September 4, the People’s Bank of China and several other Chinese government agencies jointly announced an ICO ban, effective immediately from the date of issuance. As reported by ETHNews, the Hong Kong Securities and Futures Commission (SFC) released a statement the following day that advised, “Where the digital tokens involved in an ICO fall under the definition of ‘securities,’ dealing in or advising on the digital tokens, or managing or marketing a fund investing in such digital tokens, may constitute a ‘regulated activity.’” The announcement went on to explain that those wishing to engage in such activity would have to first obtain the requisite license from the SFC.
On September 15, government officials informed two prominent Chinese exchanges, Huobi and OKCoin, that they would have to stop trading by October 31, 2017.
Last Friday, it was reported that over 90 percent of token offerings in China had completely compensated everyone who purchased their tokens.
Quotes translated from Korean using Google Translate.