A statement made by South Korea’s Financial Services Commission has just announced September 29 that a new ban on raising money via initial coin offerings for all forms of cryptocurrency will soon go into effect within the country, The Verge reports.
According to the FSC, this ban is a result of the country’s officials believing that bitcoin and other forms of cryptocurrency must be strictly regulated so as not to cause economic unrest. Once the ban goes into effect, they claim that anyone found violating the ban will face “stern penalties”, though there are not yet any details as to what these penalties will be.
Initial coin offerings, or ICOs, are a way for upcoming forms of cryptocurrency to earn the backing they need to become a viable form of digital currency with significant insurance with real money. Early investors are asked to donate money in exchange for various amounts of the currency in its infancy. If all goes well, this would create an opportunity for those early investors to exponentially surpass the amount of money they paid upfront to get a foot in the door, though the risk that the currency will simply fail are also present.
In the past few years, the prevalence of ICOs has grown in both scale and number, with the CoinDesk ICO Tracker estimating over $2.3 billion in funding having been raised through this method in 2017. This has led many governments to consider regulation in the past, China having banned them outright earlier in the month for the government’s claims of disrupting the “financial order”.
While legitimate ICO fundraisers can lead to good results for both the investors and the cryptocurrency creators, bad ones are known to have a multitude of poor consequences. Some could simply be scams intended to bleed money out of gullible investors before taking the money and running, while others function similar to a pyramid scheme.
South Korean officials also note that the ban is likely not the only thing they plan to do to tackle the issues surrounding ICOs. In the future, they predict more forms of regulation will appear to further restrict the dangers of cryptocurrency investing.
