South Korea has become the latest country to ban initial coin offerings (ICOs). The country has already issued a "prohibition on all forms of ICOs." In a statement, Kim Yong-bum, vice chairman of financial affairs at the South Korean Financial Services Commission, said that additional measures were "inevitable in order to switch (funds) to productive investments" from a "nonproductive speculative direction."
At its meeting, the commission created a task force to investigate the grounds for a ban and to regulate the trading of cryptocurrencies through on-site inspections. Bitcoin and other digital currencies in Korea are regulated by banks instead of a central government authority because they are deemed to be "representations of value" and not actual currencies. (See also: Korean Messaging App KakaoTalk Launching Cryptocurrency Exchange.)
The commission's statement is an about-face from its stance earlier this year. In January, Jeong Un-bo, vice chairman of the Financial Services Commission, compared the blockchain revolution to the internet revolution and said that South Korea would "lead the international trend in the blockchain sector if the government, related industries and experts pool their wisdom."
The Korean won is the third most traded currency on the bitcoin exchange, according to a Forbes article. In addition to this, there have been a "handful" of successful ICOs in South Korea to date. The country's neighbor China banned ICOs last month, claiming that 90% of ICOs launched on the mainland were fraudulent. A similar concern seems to have motivated South Korea's move. In an interview with Bitcoin magazine, Ash Han, entrepreneur and blockchain expert, said that the commission is "concerned about ignorant investors becoming victimized by scammers using crypto." Officials from industry associations set up to promote blockchain are planning to protest the government's decision through legal briefs and representations in the National Assembly. (See also: What Is Jesus Coin, and Does It Foretell the End of Cryptocurrencies?)
As blockchain and its associated uses move into prominence, the move could benefit Korea's other neighbor, Japan. The country has recently begun issuing cryptocurrency exchange licenses and is said to be the largest market for bitcoin trading. (See also: Bitcoin Gets Boost From Japan.)