The South Korean regulatory authority has decided to continue with the initial coin offering (ICO) ban within its jurisdiction, according to an official announcement made by the Financial Services Commission (FSC).
The decision taken by the country’s financial regulator is based on the results of a recent survey conducted by the Financial Supervisory Service (FSS) on several token offerings administered from outside the country. The FSS found that most of them are following illegal practices to raise money from South Korean investors.
Shady Tricks for Raising Funds
In the ICO survey, the FSS sent questionaries to 22 South Korean blockchain firms which conducted ICOs in the global platform raising around 566.4 billion won ($509 million) since the second half of 2017. However, only 13 firms replied to the agency’s inquiries.
The study revealed that many South Korean companies are setting up shell companies in crypto friendly jurisdiction like Singapore and Switzerland to circumvent the countries ICO ban. This also allowed the firms to attract Korean investors as the payments were done mostly in Bitcoin or Ethereum.
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In addition, some ICOs did not even disclose essential pieces of information like company profiles and financial statements. The survey also found that in some cases, the companies even furnished false information to potential investors.
According to the FSS’ report, the average value of the ICOs plunged by 67.7 percent since launch.
South Korea put a ban on then booming ICOs in September 2017 citing lack of stability of the digital asset prices. The authorities even pointed out that the asset prices can be easily manipulated by the issuers to get high prices from the potential investors.
Despite the hard stance of the government, many blockchain groups in the country were pushing for a lift of the ban as, last month, a blockchain company went to a local court calling the ban “unconstitutional”. However, after the results of the FSS survey, it is hard for the blockchain firms to get permission even from the court to issue an ICO in South Korea.