In September 2017, at the height of the initial coin offering (ICO) mania, South Korea’s financial regulator banned all token sales in the country, taking after neighboring China. Now, the watchdog wants this ban reversed and is calling for regulation in the sector.
A local outlet Money Today report reveals that the Financial Services Commission (FSC) may be changing its stance on ICOs. The vice chairman of the FSC Do Gyu-sang argued that the country should reexamine its hardline stance against ICOs and, rather than impose a blanket ban, it should regulate them.
Do was speaking before the Political Affairs Committee in the Korean National Assembly. He told the committee that his agency believes ICOs should be included in the country’s Capital Market Act, which governs the Korean securities market.
“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,” he told the legislators.
If the ban is reversed, the regulator believes there would need to be more stringent guidelines for ICO issuers to deter scammers from exploiting investors. Issuers will be required to disclose all the digital assets involved, the supported technology, its backers, and such crucial data to the regulator before they are allowed to fundraise. They will also be required to adhere to all other legal requirements that apply to stock market listings.
Once the issuer raises funds from investors, they must deposit all the funds in a bank and detail all transactions in the accounting report.
As the FSC lobbies for lifting the ban it imposed, ICOs have continued to dwindle in prominence and funds raised. While they raised tens of billions in 2017 and 2018, regulatory crackdowns and a rise in multi-million-dollar scams tainted the industry, and it’s been downhill since then. In 2019, for instance, ICO fundraising dropped by 95% year-on-year from $7.8 billion to $371 million.
As South Korea’s parliament debates the new proposals, it’s also contending with the heated debate on implementing the 20% digital currency tax.
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