South Korea’s Financial Services Commission has decided to prohibit fundraising through Initial Coin Offerings (ICO) today, with the country’s regulator further prohibiting margin trading.
According to a rough translation, FSC says they have “announced a policy to punish the act of financing using virtual currency in the form of securities issuance as violation of the capital market law.”
They express “serious concern about the fact that the current market funds are being pushed into a non-productive speculative direction,” with the regulator further saying they are concerned about “the overheating of the market due to the increase in speculative demand.”
They further prohibit unauthorized margin trading, saying the activity falls under the Financial Business Act, therefore the agency says they will:
“Pay special attention to prevent the financial institution from participating in the currency trading business,” before adding that they will try to:
“Prevent the spreading effect of the speculative transaction of the virtual currency on the financial market, prohibiting the affiliation of the operating company of the regulatory financial company in relation to the credit of the dealer.”
As a regulatory agency, FSC has no power to make any laws. They are instead seemingly stating that current financial laws apply to ICOs and margin trading, therefore those that engage in them need to comply.
They further suggest parliament might wish to put forward a digital currencies specific law to address the very nascent field and better balance any policy decisions after public debate and voter’s input.
In further clarifications, the regulator has not banned any trading in non-South Korean issued ICOs, with the action taken after a considerable increase in popularity of digital currencies in the technologically advanced Asian country.
It appears regulators are concerned they may be loosing control as innovation moves fast with the agency unable to quite keep up. They therefore appear to simply be re-iterating current law, stating it applies to this new field.
However, whether such laws should apply or not in the current form or whether they should be changed to accommodate such new innovations, is very much a matter for law makers in a democracy, rather than unelected career bureaucrats.
We have not yet heard anything from law makers or politicians regarding the ICO space, with agencies seemingly jumping the gun, with their decisions potentially taken at non-senior levels as in this case it was the vice-chairman of the Financial Group, rather than the Chairman or the one that appoints the Chairman, who laid out this policy.