South Korea Bans Initial Coin Offerings – Cryptocurrency Businesses May Be Nextbr>
South Korea’s Financial Services Commission said Friday that it plans to ban initial coin offerings (ICOs), citing the need to control virtual currencies.
Domestic violators of the ban will be subject to undetermined “stern penalties.” Reports did not indicate if the ban is immediate or will require established companies funded by ICOs to be unwound over time. It also does not mention companies that have funded themselves through ICOs.
Reports indicated that South Korea may also take some action soon to corral cryptocurrencies, which have exploded in highly wired South Korea. The actions seem to be a reversal of past support and interest, as South Korea at one time considered establishing exchange-traded funds in crypto. The FSC also indicated that it would commence on-site inspections of cryptocurrency companies and seek customer data dating back to December of last year. One immediate ban: margin trading of cryptocurrencies is prohibited.
“Raising funds through ICOs seem to be on the rise globally, and our assessment is that ICOs are increasing in South Korea as well,” the regulator said in a statement after a meeting with the finance ministry, the Bank of Korea and the National Tax Service. Such trading is a “violation of the capital market law,” and an “intensive crackdown” will commence. The FSC cited a recent wave of fake cryptocurrencies in the South Korean market, resulting in arrests and closures of companies promoting the fake coins.
The FSC also indicated that it would commence on-site inspections of cryptocurrency companies and seek customer data dating back to December of last year.
The move by the South Korean government follows China’s decision to ban ICOs. In that case, immediate action was taken, and companies funded by the financial mechanism were ordered to refund customers. A travel ban was instituted for leaders of ICO companies to ensure compliance. However, that process has taken longer than expected, as many non-domestic investors have balked at a refund, claiming their stakes have appreciated beyond their initial investments.
China followed its ICO ban with an order to shutter all domestic cryptcurrency exchanges. Although there has been speculation on whether this is a permanent ban or just a pause while regulations catch up to the market, most of the big exchanges in that country have announced closing plans.