Major events of 2017 in the Asian ICO Market — Part 2: South Korea
A three part exploration of the year’s developments for the major Asian crypto economies, and a glimpse at what 2018 may hold
See the Introduction and Part 1: China here.
South Korea
With two million people trading digital assets, South Korea is the world’s third-largest cryptocurrency market accounting for 15% of daily global trade volume.
Local analysts believe the unusual popularity of cryptocurrency in South Korea may be attributable to a unique mixture of geopolitical and cultural factors. According to Kwak Keumjoo, professor of psychology at Seoul National University, Bitcoin’s stateless nature appeals to Koreans who’ve grown weary of keeping their savings in a country that shares a border with a volatile North Korea.
With the 2017 impeachment and imprisonment of President Park Geun Hye for corruption and the subsequent jailing of the vice chairman of Samsung — a corporation that accounts for 15% of the entire South Korean economy — the public’s faith in the system is at an all-time low. “People want to take comfort in something outside and beyond the country.” Keumjoo said.
Despite their 2017 ban responding to, in the words of their Financial Services Commission (FSC), “serious concern that the recent inflow of funds into the nonproductive speculative direction,” South Korea’s faith in digital currencies fueled a number of successful ICOs in 2017 including BOScoin, which raised 6,900 bitcoins (~US$12 million) in May and ICON which raised 150,000 ether (~US$42 million) in September. The government’s concern over ICOs peaked when token sales grew beyond the digital currency community and outwards into the general public. “Given the size of the market, there’s a greater need for them to come up with something soon,” said Thomas Glucksmann, Hong Kong based head of marketing at cryptocurrency exchange Gatecoin.
On September 1st, the FSC met and discussed plans regarding the regulation of ICOs and cryptocurrencies. South Korea however, felt pressed into reacting with a firmer policy following China’s abrupt cryptocurrency and ICO ban later that month, which caused a flood of new crypto trading into the South Korean market.
On September 29th, South Korea followed China in banning ICOs. This hasty decision reflected apparent fears of fallout in the broader economy. Korean blockchain expert and entrepreneur Ash Han told Bitcoin Magazine that “‘the FSC is concerned about ignorant investors becoming victimised by scammers using crypto.” Since then, the FSC has cracked down on ICOs by arresting over 25 people accused of involvement in Illegal and fraudulent exchanges, coins, and token sales.
John Ra Ceo of Bitcoin Center Korea commented that Koreans “were expecting this kind of announcement, but we were surprised they used the words total ban. The brash move reflects the regulators’ lack of knowledge of blockchain technology and contradicts what the new Moon Jae-in government stands for.” Ra went on to note that ICOs are a global movement, and there are no realistic ways to control private use or involvement. Furthermore, issuing these prohibitions does not target the people responsible but instead attacks the technology.
On December 6th, Yong-Beom, secretary general of the FSC claimed that South Korea might lift the complete ban on ICOs by allowing professional investors to participate in a new model. The proposed new model would only permit investors who understand blockchain technology and cryptocurrency investments.
While this new model sounds effective in theory, in practice it may not fare so well. ICOs and cryptocurrency trading are new disciplines. It’s hard to define what level of education concerning cryptocurrency investments and blockchain knowledge would or should be required. Once South Korea regulates Bitcoin exchanges, as is expected in 2018 (with recent draft regulations discussed in December), their posture towards ICOs may become clearer.
See Part III: Japan here.
Part I: China is available here.
Writing and Research by Cindy Huynh
