South Korea has maintained its ban on local Crypto initial coin offerings (ICOs). The move by the government last week could end up helping the other major Crypto markets in the region such as Japan and Thailand among others. The report on the official stand of the government was released on Friday by a task force created by the Office for Government Policy Coordination.
No ICOs In South Korea
The South Korean government has confirmed that ICOs will remain banned in one of the largest Crypto markets in the world. The government considers these tools as high-risk investment vehicle according to local financial authorities. The latest move means that no ICO project will be launched in the country until such a move is reverted.
Local investors can participate in foreign-based ICOs under the current government policies. In the past year, the government claims that several Crypto companies in the country have abused this loophole and created paper firms in abroad. Local companies have been able to circumvent the strict local ban by establishing entities in countries such as Switzerland and Japan to conduct ICOs.
Government To Go After Foreign Crypto Firms
The government has expressed anger over the move by local companies to launch ICOs abroad. The financial authorities want to ensure that foreign-based entities face the same regulatory issues in Seoul, especially when they target South Korean investors.
The Office for Government Policy Coordination recently released a report that showed that as many as 22 local companies have launched ICOs abroad. The government has already reached these companies and only 13 have replied. According to the report, each firm raised about $300 million in an ICO on average. In the half of 2017, the government estimates that the companies raised around $500 million.
The country’s Cryptocurrency task force noted that despite the high amount of cash that these companies raised through ICOs, most of them didn’t reveal how they used the funds. Furthermore, they have refused to cooperate with the authorities. The government is investigating senior executives at UPbit and some other smaller Cryptocurrency exchanges in the country on their involvement in these illicit activities.
South Korea To Lose
There is a consensus that there is need to protect local investors from unscrupulous project leaders who are only after stealing their funds. Different people have given different opinions on the recent government move. According to the chairman of the National Policy Committee Min Byung-do, the government should look for other ways of fighting fraudulent activities while allowing the nascent industry to operate.
Congressman Kim Sun-dong has already expressed his disappointment in the move the government has taken. The member of the Liberty Korea Party feels that the task force failed to consider the future of blockchain and Crypto sector. The government should not have banned a sector that is already adopted in leading Crypto markets.
South Korea is expected to miss out a myriad of benefits that come with ICOs to other Crypto markets in the region and beyond. Local companies such as Kakao had already planned to conduct an ICO. Such firms will have no alternative but to move to other markets such as Japan among others. South Koreans may soon be unable to invest in even foreign-based ICOs if the government fails to reconsider its move.