What to Make of South Korea’s Decision to Ban ICOs

South Korea has tightened the noose around the blockchain community by banning initial coin offerings (ICOs), becoming the second Asian country in a month to prohibit the new crowdfunding model.

ICOs No More

Seoul’s Financial Services Commission announced the decision on Friday, stating that all kids of ICOs will be banned. Regulators said the trading of digital currencies will also be tightly regulated.

South Korea has been trumpeted as one of the blockchain community’s biggest allies, given the country’s rich technological heritage. The South Koreans have long kept an open mind with respect to cryptocurrency. This can be observed as far back as 2010 when the country implemented laissez faire regulation of bitcoin and crypto-based startups. As a result, South Korea has become one of the major hubs for digital currency trading.

Things began to change in early September when Business Korea said authorities were planning to increase regulation of domestic bitcoin exchanges. The media outlet cited recent discussions between the Bank of Korea, financial regulators and blockchain companies over advancing consumer protection efforts.

Interestingly enough, this was around the same time that China began its regulatory crackdown on cryptocurrency. Unlike previous regulatory incursions, Chinese authorities implemented an all-out ban on ICOs and bitcoin exchanges.

Evolution of Fin-Tech Continues

Seoul’s crackdown has had little impact on the digital currency market. In fact, the total market capitalization of blockchain tokens has increased since the Friday announcement.

As of Monday, the total market capitalization of cryptocurrency is $149 billion.

The fin-tech revolution has allowed cryptocurrency to evolve effortlessly over the past seven years. The transition from traditional finance toward fin-tech will continue despite the latest regulatory actions in Asia.

From a financial perspective, the next phase of cryptocurrency’s evolution is full integration with existing markets and payment methods. Grayscale has already introduced the first Bitcoin Investment Trust. Several others are chomping at the bit to launch the first bitcoin exchange-traded fund (ETF).

Business adoption is also rising sharply, with hundreds of thousands of merchants already accepting bitcoin as a form of payment. This number is expected to rise rapidly as Japanese retailers integrate cryptocurrency payment systems.

What’s more, the freeze on ICOs is unlikely to work. Chinese startups from the 40 or so de-funded ICOs are looking to re-register in Hong Kong or Singapore. This means it’s only a matter of time before Chinese investors can put their money back in the ICO market.

Clearly, the evolution of ICOs is just getting started.

Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi

Leave a Reply