On March 3, 2022, the South Korean Presidential Transition Committee recommended a crypto framework to enable the digital asset industry’s development. The Digital Asset Framework Act aims to promote crypto growth and to boost investors confidence. However, one of the recommendations is to remove the ban on domestic Initial Coin Offerings (ICOs). ICOs are a mechanism for new cryptocurrency projects to raise funds.
The Digital Asset Framework Act will pave the way for ICOs to resurface in the nation. According to the details, lawmakers will distinguish between ‘security’ and ‘non-security’ ICOs.
“It is planned to establish a regulatory system in the form of ‘security type’ and ‘non-security type’ such as utility and payment settlement depending on the economic substance of virtual assets.”
ICOs have been around since 2013, when Mastercoin launched its initial coin offering (ICO). However, it was in 2017 that people started to notice them. At the time, cryptocurrency values were skyrocketing, and early ICO investors were often becoming millionaires overnight. During this period of growth, 800 initial coin offerings (ICOs) were launched, raising a total of $20 billion.
Many of such ventures, however, were frauds trying to profit on the market’s enthusiasm since they were unregulated securities. According to research, up to 80% of ICOs launched during the ICO Boom were frauds that grabbed investors’ money and silently disappeared.
In September 2017, South Korea and China both prohibited initial coin offerings. New fundraising tactics such as initial exchange offers, initial securities offerings, and initial stakepool offerings have replaced them due to their unsavoury reputation.
Pro-crypto President of South Korea
South Korea’s new government, led by Yoon Suk-conservative Yeol’s People’s Power Party, is moving quickly to implement key changes.
In March 2022, pro-crypto politician Yoon Suk-yeol narrowly defeated political challenger Lee Jae-myung in South Korea’s presidential election, winning by less than 1%. Yoon had vowed to establish regulations to legitimise the cryptocurrency business. Investor protection measures will be implemented, as well as “transaction stability,” which refers to activities associated with token issuance, such as NFTs and exchange listings. It also includes the lifting of the restriction on initial coin offerings (ICOs).
Han Dae-hoon, an analyst at SK Securities, was unconvinced that Yoon’s crypto framework plans would follow through, saying, “We won’t know until we see it.” With Yoon’s inauguration planned for May 10, it appears he’s not wasting any time in getting things done.
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