Korea bans initial coin offerings

According to a release, the Financial Services Commission will ban ICOs across all virtual currencies in an effort to curb money laundering and various other forms of fraud, as well as an overflow of capital into speculative assets considered non-productive. Penalties for financial institutions found to be in violation of the rule were not specified.

The decision represents an extension of a pan-regional crackdown on ICOs following similar moves in Singapore and Hong Kong. Earlier this month, China central bank declared token sales illegal citing an effort to prevent “market chaos” and financial scams.

The latest bans have also contributed to expectations that more governments will prohibit ICOs as a means of preventing their economies from overheating. “I am worried that with both China and South Korea banning ICOs, all this hot money will flow into Taiwan’s stock market and real estate,” Jason Hsu, a legislator with Taiwan’s Nationalist part said, according to The Financial Times.

Regulator wariness for the funding model has increased in step with a rapid proliferation of ICO activity. Global token sales are said to have raised $500 million and $300 million across June and July, respectively. Early-stage VC funding by comparison came in at $200-300 million for the same period.

Participation by Asian venture investors has accelerated since July, when Golden Gate Ventures backed a $25 million token sale by Thailland-based financial technology company Omise that was touted as the first cryptocurrency capital raise by a major VC-backed start-up. Earlier this month, Japan’s Tech Bureau raised about $15 million from investors including Jafco to promote a platform that facilitates token sales for other companies.

Although digital tokens do not provide investors with ownership stakes, they are sold in much the same way as company shares, offering upside if operational success prompts increased demand. However, as blockchain-based units representing specific business exposure rights, they have so far remained largely outside of the legal oversight for securities.

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• Topics
• North Asia
• Financials
• Technology
• Regulation
• Fundraising
• South Korea
• Venture