South Korea Will Remain Firm on Maintaining ICO Ban, Reveals Country’s Financial Watchdog

| Updated
by Darya Rudz · 3 min read
South Korea Will Remain Firm on Maintaining ICO Ban, Reveals Country’s Financial Watchdog
Photo: Pixabay

According to FSC, the ban will not be lifted, as firms conducting ICOs were making use of foreign jurisdictions, simultaneously raising funds from South Korean nationals.

With the appearance of ICOs, it became clear that this form of raising capital should be regulated by authorities, as ICOs are characterized by ease of manipulation. South Korea took a too serious approach towards regulation of ICOs and banned all ICO-related activities in 2017, citing lack of stability.

In September last year, the South Korean National Assembly was considering lifting the ban on domestic initial coin offerings, however, after a survey conducted in September, the body said that firms conducting ICOs were making use of foreign jurisdictions, but still raising funds from South Korean nationals. That’s why the ban remained.

Later, hopes of changing the authorities’ decision appeared again. Min Byung-Doo, South Korea’s National Policy Committee Chair, announced a necessity to legalize ICOs and to provide an appropriate regulatory framework and urged the state to open the door to them. However, there were no significant changes again.

The recent news from South Korea’s Financial Services Commission (FSC) has made the position of the regulatory authority towards ICOs absolutely clear. FSC has announced that it will not lift the ban on initial coin offerings, explaining that such investments are “high risk” activities. Their decision is backed by the results of the mentioned survey conducted earlier.

In the survey, FSC sent questionnaires to 22 cryptocurrency-related firms that conducted ICOs in foreign countries and raised around $509 million since the second half of 2017. Only 13 of these companies responded.

According to the official statement from FSC, many South Korean companies are establishing shell firms in such countries as Singapore and Switzerland, where crypto friendly jurisdiction allows them to circumvent the ICO ban.

What is more, some ICO projects did not reveal important information to investors. For example, company profile and financial statements were unknown. Even false information was provided sometimes. This led to a high risk for investors.

FSC stated:

“The government has taken a cautious stance on the institutionalization of ICOs. We will stick to it.”

After the results of the FSS survey, it is very unlikely that the ban will be lifted in the near future. Now, it is hard for crypto-related firms to get permission even from the court to issue an ICO in South Korea.

STO as a Way Out

It seems that the companies previously engaged in ICO-related activities may now abandon all hopes to raise fund by this way. However, there is a way out.

There is such thing as STO — Security Token Offering. It is actually an evolution of the ICO, the difference is that STOs act as digital investment contracts combining ICOs’ Wild West versatility and reliability of traditional finance. The basis of each STO is security token, which is an investment that eventually shares profits and pays interest and dividends to the token holders.

Coinspeaker’s STO Calendar is constantly refilled with new projects. It provides all the necessary details about upcoming projects for those who are interested in STOs. For newbies, there is a complete guide that provides answers for the most popular questions about this form of fundraising.

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