The Financial Services Commission of South Korea announced it would ban the raising of funds in all forms of cryptocurrencies, reported Reuters. In this, the country follows the lead of China, where ICOs were put to a sudden stop a few weeks ago. The ban was put in consultation with the Finance Ministry, the Bank of Korea and the National Tax Service.
In addition, the authorities stopped margin trading on Korean exchanges, which may result in lowered volumes.
"Credit granting', in which a virtual caller borrows trading funds from a virtual caller, is also banned altogether," -
This does not mean individual users cannot buy tokens- anyone holding cryptocurrencies can send them without restrictions to an ICO wallet address, and there are currently hundreds of campaigns raising funds. But Seoul will lose some of its shine as a friendly hub of the cryptocurrency ecosystem.
Cryptocurrency markets responded by rapid overnight losses, erasing some of the ground they had covered in the past days. Bitcoin lost 3.5% in the last 24 hours and may drop again below the $4,000 levels. Currently, BTC stands at $4,080.86.
“Raising funds through ICOs seem to be on the rise globally, and our assessment is that ICOs are increasing in South Korea as well,” the regulator said in a statement.
The announcement also promised "stern penalties" for anyone continuing to raise funds. The reason behind the decision is that the government sees ICOs as a tool that may lead to the proliferation of financial scams.
And while trading on Korean exchanges continues, the regulator's statement also said that South Korea has not given an implicit blessing to cryptocurrency trading and will continue to monitor the markets. By the end of the year, Korean exchanges may face stricter disclosure and oversight requirements.
"We will not institutionalize virtual currency transactions," said a financial official. "We will include virtual currency trading in similar areas of receipt and thoroughly control."
The Korean ban was partially expected after national regulators moved in with sterner language. And while in previous years financial oversight was cursory, now it seems the regulators are going after almost all parts of the cryptocurrency ecosystem.
Australia recently updated its guidelines on ICOs, stating that some events of fund raising fall under the corporate act, as tokens represent securities. The US Securities and Exchange Commission also increased its oversight, unleashing a digital task force to monitor for fraud.