Citing “high risk,” “insufficient disclosure,” “no actual service” and token dump price plunges of 68% immediately after privately sold coins are introduced onto public exchanges, the Korean Government has decided to uphold strict regulation (reportedly a ban) on ICOs (initial coin offerings).
The government made the decision after reportedly surveying 22 Korean companies that issued ICOs (initial coin offerings) offshore but sold them to Koreans, Coindesk Korea reports.
13 companies reportedly cooperated in the survey, which was sent out in September.
In the release from the Korean Financial Services Commission (FSC), officials state that their decision to “strictly regulate” ICOs is consistent with the “cautious stance” adopted by many other countries internationally, including the US, EU, UK and Japan.
The FSC claims that Koreans have been registering “paper companies” (“foundations”) in Singapore and elsewhere to sidestep the local ban, but then are using, “domestic companies…for development and promotion…(and are) soliciting funds through domestic investors…”
According to Coindesk Korea, companies issuing ICOs in Korea typically have less than 10 million won ($9000 USD) of their own capital to start and have an average staff of 3, including executives.
Coindesk Korea further describes FSC findings as follows:
“The companies have conducted ICO since the second half of 2017, and the amount raised is about 566.4 billion won ($506 361 598 USD) and the average of one company is 33 billion won ($29 502 000 USD).”
With regards to project development the FSC writes (according to an automated translation):
“The project planned through ICO was finance, payment…game, etc. However, no company had actual service, and it was confirmed that it is in pre-test stage or platform development.”
The FSC also had concerns about investors’ ability to understand promised technology:
“In addition, the project information is difficult and, block chain technology and IT for related jargon is difficult…(and disclosure) insufficient.”
The FSC also noted “excessively inflated advertising” and “recurrent speculative overheating.”