South Korea’s state financial regulator – the Financial Services Commission (FSC) – has stated in a press release that it will continue to ban initial coin offerings (ICOs) in the country, after conducting an investigation into token projects that have been disregarding the law.
The FSC decision came as a result of a survey conducted by the financial institution itself, unveiling that firms conducting ICOs were making use of foreign jurisdictions, but still raising funds from local businesses and individuals.
The survey in question was conducted in September 2018, as the FSC had sent the survey questionnaire to 22 local firms that handled ICOs abroad, and only 13 responded. According to statistics, the companies had held the ICOs since the second half of 2017, raising a combined total of 566.4 billion won ($509 million).
The survey also revealed that Singapore and Switzerland were the most popular places to host an ICO amongst those companies that responded to the FSC. Due to the survey, it was found out that companies had been setting up paper companies abroad in order to bypass the ICO ban in South Korea, whilst raising funds from Koreans as proved by the white papers and marketing materials used in the Korean language.
According to data gathered from the survey, some ICO projects did not reveal any important information for investors such as company profile and financial statements, and in some cases gave false information. Respectively, the risk for investors was also deemed high as the value of the projects’ tokens had fallen by an average of 67.7% since launch.
Due to the statistics gathered with this investigation, the FSC won’t lift the ICO ban in South Korea any time soon and advises the public to do due diligence and exercise caution before getting involved with ICO related projects.
South Korea formally banned ICOs in September 2017, citing lack of stability and ease of manipulation as cause to stop citizens from buying cryptocurrency tokens.
Hong Nam-ki, head of the office for government policy coordination, stated in October last year that the financial regulators in the country had been reviewing the topic over the course of recent months and declared that the FSC survey would guide decision-making for the policy. Hopes of a reversal appeared last year after the National Assembly began debating the ban, but the tone has evidently since turned grim.