The South Korean Financial Supervisory Service (FSS) decided to ban ban raising money through all forms of virtual currencies during the September 29 meeting with the finance ministry, the Bank of Korea and the National Tax Service in Seoul. The decision to ban ICOs as a fundraising tool was made as the government sees such issues as increasing the risk of financial scams.
Kim Yong-bum, vice chairman of the Financial Services Commission, commented, according to translated materials:
“Raising funds through ICOs seem to be on the rise globally, and our assessment is that ICOs are increasing in South Korea as well. We are worried about adverse effects such as increased risk of fraud, The ICO will be prohibited in all forms.
There is a situation where money has been flooded into an unproductive and speculative direction.”
However, now the extent of the ban remains unknown due to some informational inconsistence – different national sources report different information. According to ones, the FSS prohibits all types of ICOs in Korea while according to others the ban only applies to ICOs launched by Korean startups and cites an official who states the prohibition does not extend to individual investors. Given that both claims come from respected sources, this disagreement is naturally causing confusion among the (not only) Korean crypto community.
Whatever is true, severe penalties will be issued on financial institutions and any parties involved in issuing of ICOs, according to the FSS, which, though, hasn’t provided any specific information on the details of those penalties.
Some sources also state that the FSS will further follow the example of China shutting down cryptocurrency exchanges by banning margin trading and strengthening of anti-money laundering (AML/KYC) regulations.
Until today Korea was seen as one of the markets most likely to benefit from the China’s ICO ban, becoming a new trading hub. Indeed, it could fill the void caused by the Chinese global cryptocurrency share drop from more than 90 percent in previous years to just over 10 percent today. Now South Korean ICO ban may put the country’s role within the ecosystem into question.
Given Korean importance in the global cryptoeconomy, today’s news sent the price of bitcoin down 1,5 percent in the last 24 hours while the value of Ethereum is down 4.5 percent, according to CoinMarketCap. In such a way, Bitcoin makes $4129 at press time, Ethereum – $288.
Speaking about Ethereum, the situation is, unfortunately, likely to get worse – a great deal of ethereum volume is concentrated on Korean exchanges, and, given the current situation, it is likely that demand will diminish.
Still it’s not time to become too pessimistic: the markets have already demonstrated their ability to “live out” Chinese ban on ICOs and domestic crypto exchanges, so there is a reason to believe crypto economy will endure these events well.