SEOUL -- The South Korean financial watchdog will forbid initial coin offerings, it said Friday, prompted by signs that the fundraising method would be used to speculate on prices.
The Financial Services Commission said it aims to protect financial market stability and investor safety. China also recently banned ICOs, which are increasingly being seen as disruptive to financial order.
In ICOs, people and businesses seeking capital issue virtual "tokens" to investors in return for payment, including through such cryptocurrencies as bitcoin, which can then be swapped for cash at an exchange. Unlike bond floats or stock issuances, the offerings can quickly and easily reach people and businesses inside and outside the issuer's country. Many people apparently buy into the offerings to bet that the tokens will gain in value.
Friday's announcement followed a meeting of a government task force. The FSC said it will not allow ICOs in any form, regardless of whether financial engineering is involved or what terminology is used.
Sums raised through ICOs are not noticeably rising at present, according to a source affiliated with the financial authority. But with talk popping up of allegedly fraudulent offerings, the FSC apparently judged it necessary to regulate ahead of such scams. Details like a schedule for legally enacting the ban remain to be settled. Virtual currencies themselves will apparently not be banned from circulation.
