The South Korean ICO Ban is Changing the Crypto Game
New innovations and pioneering technologies are disrupting traditional business models. The evolution of the crypto world and the birth of ICOs are influencing the way people invest; unfolding new opportunities that seemed ludicrous almost 5 years ago.
Whenever we get accustomed with one technology, something eccentric and better comes to the surface; breaking the rules and compelling the world to adapt. Blockchain technology is the immutable digital fabric that has changed the way people raise money to fund their startups.
With the digital currency bazaar altering the fintech industry through guarantees of being private, secure, and anonymous, increasingly more businesses and investors around the world are being drawn by “the next generation gold”.
The ICO trend has recently compelled lawmakers and government officials to pick up the pace, and issue new rules and regulations meant to stir things up in the crypto world. The most recent event is the ICO ban in South Korea.
South Korea bans ICOs to protect investor assets
Cryptocurrencies don’t live within national borders; the process of trading is frictionless around the globe (buying/selling/trading is identical). Regardless, the exchanges many investors use for trading are conditioned by the exchange’s country regulations. Furthermore, if the trade volume in a country is sufficiently high, chances are the market structure of the exchange — together with the regulatory regime of the country — have a direct impact in the price of cryptocurrencies.
Regional news source JoongAng issued a report highlighting that the Financial Supervisory Service of South Korea has banned ICOs (initial coin offerings) starting September 29. Allegedly, the decision was taken as a precaution measure to protect investors and prevent fraudulent investments in fake ICOs.
Is South Korea following China’s footsteps?
Rumor has it that South Korea is following China’s footsteps, which banned ICOs on September 4; arguing they’re extremely vulnerable and susceptible to money laundering, since all transactions are anonymous. The decision to ban all forms of funding based on cryptocurrency, in South Korea, came after realizing that ICOs could lure investors in with promises of false sizeable returns.
Up to now, over $2 billion has been raised from this fundraising method. At the core of a new ICO there’s a new altcoin (digital token) that investors can purchase in the hopes of “winning the lottery someday”, and benefit from that ICOs product using the tokens they’ve initially invested.
It looks like initial coin offerings are overheating the market, triggering a high demand because of their speculative nature. Regardless, not everyone invests in ICOs to get rich. Some actually believe in the potential of a company built on the blockchain to go big, and achieve greatness sometime in the future.
Filecoin is a great example of an ICO with potential. The startup managed to raise $257 million with its concept of a decentralized file storage network.
The digital currency bazaar — the perfect ground for fake ICOs
Since the birth of Bitcoin, hundreds of other digital coins took the crypto market by storm, triggering a digital currency bazaar. At this point, Bitcoin rules the “era of a cashless society”, followed by Ethereum, Ripple, Bitcoin Cash and Litecoin. We’ve seen interest in trading cryptocurrency grow among investors around the world. Increasingly more people are open to opening ICOs on the blockchain to fund their startups.
Bitcoin advocates argue that cryptocurrency is a superior payment mechanism. The benefits are unshakeable, three of its core benefits being: global scope, uncontrolled by government officials, and decentralized. Regardless, with the great power of blockchain comes concern regarding the legality, control, usage and accountability of its cryptocurrencies.
REcoin is an unfortunate example of an ICO gone wrong. Initially, the startup promoted itself as a trusted cryptocurrency-based real estate company. Owned by Maksim Zaslavskiy, REcoin was accused by the Securities and Exchange Commission (SEC) of selling unregistered coins and securities. The US government got a court order to freeze all of Zaslavskiy’s assets, raising concern and creating doubt in the actual benefits of ICOs.
How ICOs bans are influencing Bitcoin
Soon after the Bitcoin fork and the birth of Bitcoin cash, Bitcoin was on a roll again; climbing to an all-time high of $5,000 in early September. Somehow, by September 15 it took a plunge by 37%. A recovery is underway, with prices increasing above $4,000 once again.
Many would say that China was the main culprit for the unexpected crash. After banning ICOs on September 4, there were rumors that the Chinese government will also ban cryptocurrency trading altogether. Soon after that event, BTCChina announced that it will suspend Bitcoin trading.
Further questions and concerns around China having monopoly over bitcoin mining triggered an even bigger chain reaction. The end result: the Bitcoin crash throughout September.
The best places to host ICOs
Where can you host your ICOs if two of the world’s largest countries — The United States and China — has banned them? South Korea is the third, with Australia and The United Kingdom issuing extremely tough rules and regulations; as well as warning signs that are just meant to scare off potential investors.
After several years of scepticism around cryptocurrency, Russia might become a safe heaven for ICOs. A Russian company owned by Dmitry Marichinev, Vladimir Putin’s internet advisors, is planning to fund his own blockchain-based company with $100 million in cryptocurrency.
The plan is to build an ICO and become a direct competitor to China’s bitcoin mining process. Marichinev’s Russian Miner Company sells RMC tokens, but its purpose goes beyond the mining collective. The ICO’s ambitions is to enter the crypto mining scenario in a much more ambitious way: their aim is to produce the mining equipment, considering bitcoin mining involves manual computational labor
Since the process is energy intensive, it demands special computers with special chips. Marichinev wants to redirect $10 million to produce and develop highly-efficient processors.
South Africa’s Central Bank issued an official statement, highlighting that it will not provide any form of protection to ICO investors. This is good news for cryptocurrency enthusiasts because it underlines that the South African government has no intentions of banning ICOs. The statement was issued to keep investors in the loop; and compel them to take extra precaution measures when investing in an ICO.
There are top-performing ICO tokens spread across the country, like IOTA, Stratis and NEO; which have generated great returns since their initial launch. Regardless, investors should know that there are also many mediocre projects issuing digital tokens with the purpose to scam them with ICOs that seem too good to be true.
Northern Europe is yet another great place to host your ICO. Both Denmark and Sweden are pushing towards eliminating cash by embracing digital currency. While the Danish Central Bank hasn’t made Bitcoin an official currency, the country is home to lots of successful Bitcoin exchanges and startups. CCEDK, for example, is one of Denmark’s most productive innovators in the crypto world with its decentralized exchange and BTC 3.0 technology.
ICOs — predictions for the future
From a positive perspective, ICOs could be part of a more mature ecosystem in the future. Core market players may begin establishing higher standards, to set apart real projects from scams. Stricter regulations may come next; their purpose won’t be to stop the people from investing, but to protect their interests.
As the crypto world moves ahead, increasingly more companies will want to know more about ICOs. In spite of their decentralized and unstable nature, the mere fact that you can raise millions a limited amount of time instills curiosity among investors around the world. Gnosis managed to raise an astounding amount of $12 million in under 10 minutes in April; and Brave, a new web browser company, only needed 30 seconds to raise $35 million in May.
