​South Korea bans digital currency offerings

Virtual currencies have taken a hit in South Korea, as financial authorities have banned initial coin offering (ICO) and credit exposures that use digital currencies.
Written by Cho Mu-Hyun, Contributing Writer

South Korea will ban all forms of initial coin offering (ICO) due to the risk of scams, the country's financial watchdog has said.

The Financial Services Commission (FSC), the country's finance regulator, said all forms of ICO are completely banned, as are credit exposures such as the loaning out of digital currencies.

The FSC said ICO, the popular fundraising scheme with new startups and individuals, had a high risk of asset bubble and that investors were vulnerable to scams and market manipulation.

Businesses using digital currencies that are in the credit exposure will also be banned from signing MOUs or sales to financial institutions.

There have been cases where ICO was used for speculative reasons, FSC said, adding that it will step up their crackdown efforts. The watchdog banned the use of digital currencies in issuance of securities earlier this month.

The FSC did stress that the government was not "institutionalising" the exchange of digital currencies, but will monitor the situation for better regulatory oversight going forward.

South Korea is estimated to have around 1 million people having bitcoin, and there have been calls for regulatory oversight due to the increase in its usage.

South Korea follows the lead of the US, China, Singapore, and other countries that have announced similar regulations.

Meanwhile in Australia, the country's corporate watchdog urged those involved in ICOs to err on the side of caution to ensure they are abiding by the country's laws.

"We want to ensure innovative firms understand the regulatory framework they may be operating under and ensure they meet any obligations they may have when raising funds in Australia," ASIC Commissioner John Price said on Thursday.

"ICOs are highly speculative investments, are mostly unregulated, and the chance of losing your investment is high."

While ASIC recognises ICOs have the potential to make an important contribution to the options available to businesses to raise funds and to investment options available to investors, it said an ICO must be conducted in a manner that promotes investor trust and confidence, and complies with the relevant laws.

Earlier this month, China banned ICOs, with a recent ruling from the People's Bank of China labelling them "illegal". As the offerings are often based on speculation, the country's regulators believe they are likely linked to "illegal financial activities [which] seriously disrupt the economic and financial order".

The Chinese central bank demanded that any ICOs operating from China cease immediately, and if ICOs have already taken place, organizations and individuals behind them must complete returns and refunds. If this is not done, Chinese law enforcement will investigate and if necessary, prosecute.

It was revealed that a hacker had made off with roughly $7.4 million in ethereum during the July ICO of CoinDash, a trading platform for cryptocurrencies. Veritaseum lost $8.4 million at its ICO, and a similar attack followed against Enigma in which at least $500,000 in ethereum was stolen.

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