South Korea bans ICOs

South Korea fans hold placards of their national flag before their 2011 Asian Cup semi-final soccer match against Japan at Al Gharafa stadium in Doha January 25, 2011.

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South Korea fans hold placards of their national flag before their 2011 Asian Cup semi-final soccer match against Japan at Al Gharafa stadium in Doha January 25, 2011.
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REUTERS/Oleg Popov

LONDON – South Korea has followed the example of China and banned all “initial coin offerings” (ICOs).

South Korea’s Financial Services Commission on Friday took the decision to ban all forms of cryptocurrency-based money raising activity, saying it has “serious concern about the fact that the current market funds are being pushed into a non-productive speculative direction.” Business Insider reported earlier this month that South Korea was considering a crackdown.

The regulator pointed to similar actions from US, Chinese, and Singaporean regulators to curb the runaway market.

ICOs have become one of the hottest methods of fundraising in 2017, with over $2 billion raised to date using the method. ICOs are where startups or established companies raise money by issuing new digital currencies, akin to bitcoin.

However, these new currencies – numbering over 800 to date – are highly volatile and owners often have few rights linked to their investment.

The Financial Services Commission added that there is “concern about the adverse effects such as the increase in the risk of fraudulent receipt, which induces investment by leading ICO,” as well as “the overheating of the market due to the increase in speculative demand.”

South Korea’s regulator on Friday also announced curbs to margin trading in the cryptocurrency space, where platforms allow people to trade digital coins using borrowed money.