February 22, 2018

Korea to ban digital currency offerings

30 September 2017, 03:54 | Cassandra Thompson

Kim Yong-beom vice chairman of the Financial Services Commission talks during a meeting on cryptocurrencies on Sept. 29 in Seoul

Kim Yong-beom vice chairman of the Financial Services Commission talks during a meeting on cryptocurrencies on Sept. 29 in Seoul

The decision follows other financial regulators around the world that have grown cautious about the rapid development of unregulated digital currencies.

The move came on the heels of Chinese authorities' ordering Beijing-based cryptocurrency exchanges to stop trading and immediately notify users of their closure.

The country's regulator, the Financial Services Commission (FSC), issued the ban following a meeting Friday, reasoning that ICOs are pushing the market into a "non-productive speculative direction".

But the lack of oversight has attracted criminals, with some estimates showing about 10% of all ICO funds being stolen by thieves.

The announcement triggered a sell-off in crypto markets.

According to Bloomberg, digital currencies like bitcoin and ether experienced a small drop in price following the ban - 5.7 percent for ether and 3.5 percent for bitcoin - but both have already recovered.

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"The majority of ICO tokens are being issued through the ethereum platform", said Glucksmann. They may have other value; usually the tokens provide a means to actively participate in the startup's project, and they can typically be sold for other cryptocurrencies, such as Bitcoin or Ethereum.

The government plans to investigate any violations and deal with them strictly even before its measures are legislated, it said in the statement.

South Korea also sees bitcoin as potentially vulnerable to North Korean hacking.

In lockstep with the ban South Korean regulators have vowed to further inspect all cryptocurrency exchanges for any violations of the ban, which according to the Wall Street Journal extends to sophisticated margin trades as well, or buying digital tokens with borrowed money. CBOE last month said it planned to roll out its own Bitcoin futures in the coming months.

Regulators across the world, including the U.S., Singapore, Hong Kong and United Kingdom, have warned companies contemplating an ICO that they may violate securities laws.

The Australian Securities and Investments Commission (ASIC) released guidance for businesses that undertake initial coin offerings (ICOs), amid fears of an asset bubble.

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