In September 2017, the South Korean government bannedthe initial coin offerings (ICO), shutting down local cryptocurrency exchanges. The move was based on a number of concerns like money-laundering, deceit, and frauds – something that is shared by many regulators worldwide. China and some other countries also banned the crypto-trading and ICOs for the same reasons.
Since then, the business community has been pressing the government to take the decision back as it is hampering local businesses’ ability to raise funding and offer blockchain-focused products, services, and solutions. In fact, a large number of Korean businesses have simply moved offshore, exploring crypto-friendly countries like Japan, Switzerland, and Singapore. This has resulted in massive currency outflow from the country, ending up with thousands of missed business opportunities.
However, since the start of 2018, we have seen a number of indications that the government is reversing its stance on cryptocurrency market, and trying to be moderate on the practices. While the blanket approval for the crypt-products is not expected, we may see certain regulations – where businesses and investors are asked to follow certain guidelines in order to obtain legal status for their token sale.
In order to prepare the legal framework, the South Korean National Assembly had set up a working committee to come up with recommendations. According to Korea Times, the body has suggested formation of a task force that includes experts from private sector – which ensures transparency in trading, and setup of a governance model.
In other words, they are going to take businesses into confidence to prepare fundamental guidelines and then put up a dedicated body to judge ICOs on merit. This way, the government and regulators will have complete information about the transactions, minimizing the chances of deceit or money-laundering.
The Korean legislators have shown massive support for this framework, asking the government to allow ICO transactions under its supervision. If the suggested legal framework is passed, it would be taken a very positive sign for the market. It will boost the business activity, and also guarantee investor protection, bringing in more players.
Why Would Korea Do That?
- The fundamental trigger is that South Korean population has shown an enormous appetite for blockchain products and cryptocurrencies. They’re one of the leading traders and innovators in the blockchain domain – and hence, need to have the legal cover to do the business activity at home.
- Vast migration of crypt-centric business activity has led to dual costs. It not only led to the outflow of the capital but also resulted in thousands of missed opportunities at home.
- The political and business elite’s pressure is another factor as tech-savvy society has set quite ambitious targets to achieve. As we covered before, Seoul’s mayor has announced a dedicated plan to convert the city into a hub of technology, releasing their own cryptocurrency, and making everything digital.
- A complete ban on the crypt-trading and ICOs has proved out to be a futile exercise as the enthusiasts have found other ways to take part in the business activity. Hence, the government may want to adopt a new and moderate approach.
- Blockchain has been studied as a potential source to bring a lot of innovation and help the country materialize its vision of “Smart Nation”. With the ban in place, they cannot convert Seoul into the first smart capital on the planet.