In late 2017 both China and South Korea banned ICOs, around the same time that the crypto world rocked with new ERC-20 startups. Projects of all shapes and sizes were created and every one of them did an initial coin offering or ICO.
During the popularity, these projects would sell out almost instantly and many of them had zero products or sometimes had no code at all. This initial frenzy led to a plethora of scams and illegal fundraising schemes that caught the eye of many regulatory officials.
The United States put its foot down and said that any ICO needed to register with the SEC or run the risk of being audited or shut down. With regulations increasing, many new projects changed how their ICOs worked, many of them banning contributors from the US, China, or Korea.
Most new projects run their ICOs in various ways and call them different names to avoid regulatory issues. Instead of selling their initial tokens themselves, they use launch pads to sell tokens. These launch pads will include Know Your Customer (KYC) features as well as blocking users from certain geographical locations. With this shift to more compliant token sales, Korea has started to look into allowing ICOs again.
A new draft has been submitted to Korea’s Finance Services Commission (FSC) which will allow ICO sales, but only offer to corporations. The companies that participate in these ICOs will be under increased scrutiny with their white papers and tokenomics made to be legislated.
Each project must submit a whitepaper that includes its design, purpose, digital currency type, how they plan to use public funds, and any risks associated with the project. The wallet(s) that accept these public funds must also detail out how taxes and fees will be handled. Interestingly the documents provided must include the exchanges the digital currency will be listed on, something not seen before in cryptocurrency.
This change to the regulation is good for cryptocurrency companies that wish to start their business in Korea. Many retail investors will feel hard done by this change as it excludes the ability to participate in new digital currencies, which is typically when the best return on investment can be found.
This draft has yet to be approved and will have a long legal road ahead of it before it can be passed. Acceptance of this draft will be a big push toward the legitimacy of digital currencies in one of the biggest cryptocurrency markets.