South Korea’s financial authority prohibited all token sales in September 2017, during the height of the initial coin offering (ICO) craze, following China’s lead. Now, the regulator is urging the prohibition to be lifted and for the industry to be regulated.
According to a recent report, the Financial Services Commission (FSC) may be modifying its position on initial coin offerings (ICOs). Do Gyu-sang, the FSC’s vice chairman urged that the nation reconsider its strong attitude on ICOs and regulate them rather than impose a blanket ban.
Do was addressing before the Korean National Assembly’s Political Affairs Committee. His agency thinks ICOs should be included in the nation’s Capital Market Act, which controls the Korean securities market, he told the committee.
To do so, he said lawmakers, “We cannot delay the ICO any longer. (ICOs) must be included in the Capital Market Act. To do that, we need to revisit some provisions and look at the relationship with the (Virtual Industrial Rights Act) enactment or special law.”
If the prohibition is lifted, the watchdog feels that more severe standards for ICO issuers would be required to prevent fraudsters from manipulating investors. For example, before being authorized to fundraise, issuers will be obliged to declare any digital assets involved and the supporting technology, its sponsors, and other critical information to the regulator. They’ll also have to follow all other legal criteria that pertain to stock market listings.
After raising money from investors, the issuer must deposit all cash in a bank and document all activities in an accounting report.
As the FSC pushes for the removal of the restriction, the popularity of ICOs has waned, as has the amount of money collected. While they generated tens of billions in 2017 and 2018, the business was soiled by regulatory crackdowns and an increase in multimillion-dollar frauds, and it’s gone downhill since then. For example, ICO funding fell 95% year over year in 2019, from $7.8 billion to $371 million.
The new ideas are being debated in South Korea’s parliament, which also deals with the contentious issue of instituting a 20% digital currency tax.