South Korea has banned initial coin offerings (ICOs), according to reports from local media sources.
As reported by regional news sources News1 Korea and JoongAng, the South Korean Financial Supervisory Service (FSS) decided to ban initial coin offerings during the September 29 meeting of its cryptocurrency task force in Seoul. The purpose of the ban is to protect investors from fraud.
“We are worried about adverse effects such as increased risk of fraud, The ICO will be prohibited in all forms. ” JoongAng cites Kim Yong-bum, vice chairman of the Financial Services Commission, as saying (according to a rough translation).
However, while the two outlets cited above concur that Korea banned ICOs, they disagree about the extent of the ban. According to News1, the FSS “prohibits all types of ICOs in Korea.” JoongAng, on the other hand, indicates that the ban only applies to ICOs launched by Korean startups and cites an official who states the prohibition does not extend to individual investors.
Crypto Korean, a reliable source for digital currency news within the country, was the first to bring the news to the attention of Western readers. Noting that both claims come from respected sources, Crypto Korean says the disagreement is “causing confusion among [the] Korean community.”
The reports also state that the FSS will crack down on cryptocurrency exchanges by banning margin trading and stepping up enforcement of anti-money laundering (AML/KYC) regulations.
The Korean ICO ban–which comes just weeks after China issued a blanket ban on this nascent funding model–could have far-reaching implications, the degree of which will correlate to the extent of the prohibition. Korea was seen as one of the markets most likely to benefit from the void created by China’s ICO ban, and the country’s most popular messaging app had recently announced the creation of a new cryptocurrency exchange that would support more than 100 altcoins. A comprehensive ICO ban could potentially call Korea’s role within the ecosystem into question, while a ban restricted to domestic ICOs would be much less disruptive.
In either case, the ban will likely put short-term downward pressure on the ethereum price as investors sort out the details. A great deal of ethereum volume is concentrated on Korean exchanges, and it is likely that demand will diminish if local investors are prohibited from contributing to ICOs or trading for ERC20 tokens. That said, the markets have already demonstrated their ability to weather the Chinese ban on ICOs and bitcoin exchanges, so investors have reason to believe they will endure this storm as well.
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Last modified: May 21, 2020 9:13 AM UTC