South Korea’s Financial Services Commission (FSC) has forbidden initial coin offerings (ICOs) and is considering to prohibit margin trading on digital currencies.
According to the report of CoinDesk, FSC will prohibit all forms of the blockchain funding method “regardless of technical terminology”. After the ruling margin trading of virtual currencies will also be illegal.
The FSC considers the token offerings overly speculative and are a “violation of the capital market law”, hence the regulator is planning an “intensive crackdown” will ensue, with “stern penalties” issued on parties involved in ICO offerings.
ICOs have become recently a very popular fundraising method for new cryptocurrency ventures and startups. It, however is unregulated and is used to bypass the rigorous and regulated capital-raising process. Usually the ICO campaign sells a percentage of the cryptocurrency to early backers for fiat currency, but most often for Bitcoin.
Recently Dubai’s Financial Services Authority (DFSA) has warned investors of the risks of ICOs. So did the Monetary Authority of Singapore (MAS) and the Commercial Affairs Department (CAD).
The FSC is also planning other measures to regulate cryptocurrencies in South Korea, including on-site inspections and analysis of user data. The Commission is also planning to further review the operations of the cryptocurrency exchanges in order to “amend unfair terms and conditions, including arbitrary withdrawal restrictions.”
Recently South Korea saw a growing interest in cryptocurrency trading. According to Coinass market data trackers, showing that in the past two years in Korea was traded bitcoin worth 1.92 trillion won. The same source claims that the number of bitcoin transactions rose 17.1% in 2016 over the year.
There are several digital currency trading platforms in Korea – Bithumb, Korbit and Coinone – and currently they lack legal grounds for their existence. There are also several foreign cryptocurrency exchanges, like Gemini, who also operate in the country.
Earlier this year media reports claimed that South Korea is planning to regulate digital currencies and exchanges.