Crypto Frontline

South Korea Keeps ICO Ban in Place

South Korea Keeps ICO Ban in Place

South Korea Keeps ICO Ban in Place
February 01
15:49 2019

 

Bad news continues to come out from South Korea and this time ICOs are the ones hit. According to coindesk.com, the Financial Services Commission (FSC) does not want to lift an ICO ban put in place in 2017.

Prospects and expectations for ICOs in 2019 had already been weak. The news continues to fuel the uncertainty surrounding financing for blockchain-based start-ups, but as we will see below, companies had managed to figure out a way to bypass the ICO ban.

Companies found violating rules

It seems like the main reason behind South Korea’s financial watchdog is related to a survey conducted by the other financial agency – the Financial Supervisory Service (FSS). Starting from September last year, the agency conducted a survey involving 22 blockchain-based companies which had conducted ICOs abroad, but only 13 out of all the companies provided answers.

What the survey found is similar to what we saw in China, where people also managed to bypass the total ban set up by the local government. More specifically, paper companies had been set up in near countries where regulation for ICOs is friendlier (Singapore was the most popular) and yet funds were still being raised from Korean citizens.

A decision from South Korean officials related to ICOs was expected since November 2018 and companies had been waiting ever since for any positive signs. The FSC failed to deliver and the ICO ban will remain as it is right now.

The above-mentioned survey also brought to light negative aspects about how ICOs had been conducted. Important information had not been disclosed to investors (company profile, financial statements etc.), false information had been provided in some cases, and last but not least, tokens remained high-risk investments, since the value had fallen by an average of 67%.

Unfortunately, the results of the survey played a key role in the final decision, an aspect announced by Hong Nam-ki, the head of the Office for Government Policy Coordination, back in October last year.

Still, blockchain-based start-ups managed to bypass the ban so far, which mean the same approach might be taken by other companies wanting to raise funds via an ICO. South Korea is still one of the biggest markets for cryptocurrencies, despite a not-too-friendly treatment for public agencies.

Several big thefts and exchange hacks had been hurting the confidence last year, which also made the government to start on a regulatory framework, which is still waited by the blockchain community.