Crypto: ICO ban in South Korea likely to be lifted

Lavina Daryanani

Back in 2017, when crypto started garnering mainstream traction, the Korean government placed several stringent restrictions. Per regulators, the prohibition was prompted by crypto’s high volatility and speculation, and illegal activity within the country.

Alongside, virtual currency fundraising was also prohibited in the country. The chief goal of implementing the same was to manage and monitor digital assets. Per the latest development, however, looks like the ban on initial coin offerings could be on the way out.

End of ICO ban?

In a recent statement, the central Bank of Korea spoke out in favor of policy change. Via the proposed Digital Asset Framework Act, the bank has proposed that there is a need to institutionally allow local cryptocurrency ICO for traded digital assets. Per local media outlet Infomax ,

“The Bank of Korea argued that it was necessary to allow new issuance (ICO) of crypto assets in Korea.”

Back when the ban was in place, the likes of Kakao and the Hyundai Group had launched coins via overseas affiliates before listing them on domestic exchanges. However now, the proposed regulation will bring in clarity to the sector and companies will be able to choose the indigenous path.

The bank, in its statement, said,

“In the future, when the Framework Act on Digital Assets is enacted, it is necessary to institutionally allow domestic cryptographic asset ICOs. The effect of making it possible to prepare a protective device is also expected.”

Apart from clarity, the bank revealed that the purpose of the regulation was to protect consumers and improve the transparency of crypto-related transactions. The BOK, however, doesn’t want to tread on the excessive regulations path. Elaborating on the same, it highlighted that a balanced approach was needed to foster a healthy market. It further intends to promote blockchain and crypto asset innovation without hindering the development of related industries.

Leaving aside Korea, it is quite known that the European Union had been working on the Markets in Crypto Assets [MiCA] framework since 2020. And of late, the same got a nod by the members of the parliament. As reported earlier, large stablecoins will be subject to strict operational and prudential rules, with restrictions if they are used widely as a means of payment, and a cap of 200€millions in transactions/day.

Alongside, stablecoins will have to maintain reserves to cover all claims and provide redemption rights to the holders. The reserves will have to be legally and operationally segregated and insulated in the interest of the holder and they will be fully protected in case of insolvency.

Read More: Did the downfall of Terra influence EU’s MiCA regulation?

Drawing parallels to the same, Bank of Korea said,

“In Korea, recently, considering that users suffered a lot from the Luna-Terra incident, it is necessary to adopt MiCA-level regulations for stablecoins.”

The Korean market sentiment

Koreans, on their part, have been taking advantage of the choppy state of the market. From 25 August’s 1.37, the Kimchi Premium Index’s reading has risen to 3.2, bringing to light the increasing buying pressure in the Korean retail investor market.

Keeping an eye on this index’s reading over the next few days would give us an insight into how market participants perceive the proposed changes to be.