South Korea’s top financial regulator on Thursday clarified that Initial Coin Offering (ICO) issuance will remain banned despite the government’s inclination towards setting up a blockchain hub in Seoul.
Choi Jong-koo, the chairman of the Financial Services Commission (FSC), said during their parliament audit session that they should not confuse the potential of blockchain with the possibility of cryptocurrencies, adding that companies issuing crypto-assets to generate funds for volatile projects could pose severe risks to investors.
“Many people say the Korean government should allow ICOs, but ICOs bring uncertainty, and the damage they can cause is too serious and obvious,” Choi said. “For these reasons, many foreign countries ban ICOs or are conservative towards them.”
Lawmakers Recommend ICO Regulation
The remarks appear after the lawmakers’ efforts to make amendments to South Korea’s Electronic Financial Transaction act which does not recognize cryptocurrency transactions. There are currently five crypto-focused bills pending in the National Assembly that seek regulations for cryptos and ICO issuance. The digitized crowdfunding method remains banned since FSC’s direction in September 2017 which, lawmakers believe, are hurting South Korea’s potential in the global blockchain market.
“The National Assembly has officially proposed to allow private initial coin offerings (ICOs). As the administration is sitting on its hands after imposing a total ban on ICOs in September last year, the National Assembly has come forward with an official recommendation.” – the proposal reads.
Choi, however, believes ICO rounds are misleading because of weak investor protection and little business planning.
“We are [first] investigating the side effects of initial coin offerings (ICOs) from cases in overseas countries,” the chairman said in response to lawmakers’ recommendations.
Choi’s remarks about not equating blockchain and cryptos have ended up showing the celebrated regulator’s weak understanding of the digital ledger technology. Digital tokens represent the core purpose of a public ledger, a reward to keep a decentralized network immutable, censorship-free and most importantly, secure. Without it, a blockchain network is no less than a private database.
South Korean blockchain startups could find themselves unable to practice funambulism between following legalities and maintaining innovation. It is a hard balance to maintain. On top of that, an unresearched comment from their chief regulator could weaken their perspectives towards staying back in South Korea.
The government representatives have already recognized the tough legal spot for these innovators, and fear they might move out of South Korea while the capital develops a $100 million blockchain park for them.
“With the government failing to present any guidelines for ICOs, domestic blockchain companies are going to Singapore and Switzerland to do an ICO and pay unnecessary expenses,” a South Korean news outlet reported.
Earlier, companies in the US had also expressed similar concerns to their lawmakers after startups started moving to crypto-friendly countries after feeling threatened by the SEC crackdown.