The South Korean Financial Supervisory Service (FSS) decided to ban initial coin offerings during their September 29 meeting in Seoul. The purpose of the ban is to protect investors from fraud.
We are worried about adverse effects such as increased risk of fraud, The ICO will be prohibited in all forms.
Kim Yong-bum, vice chairman of the Financial Services Commission.
The ban only applies to ICOs launched by Korean startups and does not extend to individual investors.
Reports also state that the FSS will crack down on cryptocurrency exchanges by banning margin trading and stepping up enforcement of anti-money laundering (AML/KYC) regulations.
Potential Implications of the ban
The Korean ICO ban–which is coming just weeks after China issued a blanket ban on this nascent funding model–could have far-reaching implications, the degree of which will correlate to the extent of the prohibition. Korea was seen as one of the markets most likely to benefit from the void created by China’s ICO ban, and the country’s most popular messaging app had recently announced the creation of a new cryptocurrency exchange that would support more than 100 altcoins. A comprehensive ICO ban could potentially call Korea’s role within the ecosystem into question, while a ban restricted to domestic ICOs would be much less disruptive.
In either case, the ban will likely put short-term downward pressure on the ethereum price as investors sort out the details. A great deal of ethereum volume is concentrated on Korean exchanges, and it is likely that demand will diminish if local investors are prohibited from contributing to ICOs or trading for ERC20 tokens.
That said, the markets have already demonstrated their ability to weather the Chinese ban on ICOs and bitcoin exchanges, so investors have reason to believe they will endure this storm as well.
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