Initial Coin Offerings or ICOs are no longer legal in South Korea.
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.”
The regulator has also banned margin trading on cryptocurrencies.
The move comes weeks after China’s financial regulator banned all ICOs in the country, delivering a blow to this booming method of fundraising. South Korea’s regulator announced that a ban might be imminent in early September, warning that it would “strengthen levels of punishment” for “illegal fund-raising.”
The ICO or a token crowdsale is a way of raising funds by selling digital tokens, typically based on the Ethereum platform. These tokens are different than company stock in the sense they rarely give its owners direct ownership of the company behind the ICO. 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.
But several regulatory bodies, including those in the U.S., China, Hong Kong, Singapore and Russia, have recently warned that lack of regulations has turned ICOs into a playground for scammers.
China has followed the ICO ban with a country-wide ban of cryptocurrency exchanges; it’s unclear whether South Korea plans to do anything similar. Earlier this week, South Korean app maker Dunamu and U.S. cryptocurrency exchange Bittrex announced a deal to launch a new cryptocurrency exchange in South Korea called Upbit.
The priced of Bitcoin and Ethereum are holding pretty well following the news. After a short-lived dip, the prices ($4,200 and $296, respectively) are roughly where they were 24 hours ago.