Responding to media reports that South Korean internet giant Kakao plans to raise funds using an initial coin offering (ICO) abroad, the country’s financial regulator reportedly warned that the ICO could violate current cryptocurrency regulations.
ICOs Abroad Could Still Violate Korean Laws
Kakao Corp, which operates the country’s most popular chat app, Kakao Talk, plans to raise funds through an ICO overseas as well as issue its own Kakao coin, according to local media reports.
At a press conference held at the government building in Seoul this week, the chairman of the Korean Financial Service Commission (FSC), Choi Jong-ku, described his department’s assessment of Kakao’s situation. “Although there were media reports that Kakao and Kakao Pay are planning to raise funds through ICOs abroad, financial authorities have not confirmed this fact,” the Korean Financial Daily reported. Choi emphasized, “No funding has been confirmed.”
He reiterated that “current laws [in Korea] do not prohibit ICOs from abroad,” but pointed out that “it is highly likely to violate current legislation,” the news outlet conveyed. Citing that Kakao is a major shareholder of Kakao Bank, he explained that the company’s ICO overseas “will lead to the problem of credibility of Kakao Bank.” The chairman was further quoted by No Cut News saying:
Even if there is no prohibition on virtual currency, there is a possibility that it may be regarded as…[similar to] fraud or multi-level sales according to the issuance method…Since the risk is very high in terms of investor protection, the government has a negative stance on the ICO.
Kakao Says No Official Plans for ICO Yet
The Korean Economic Daily quote a Kakao official saying on Friday:
We have not yet officially released plans for the ICO…As far as the ICO of Kakao is concerned, there is nothing to be determined.
Meanwhile, the news outlet reported that a message pre-selling the Kakao coin has already been distributed through social media, which Kakao calls “an obvious fraud.”
An official of the company explained that the internet giant has been preparing for a blockchain platform business, emphasizing that “Virtual currency is inevitably required to activate the platform, but the development schedule is not yet known.”
While South Korea has already banned ICOs in the country, “there is no clear regulatory basis because the relevant legislation does not pass the National Assembly,” Sedaily detailed. “ICOs are likely to be fraudulent, multi-level…depending on the method of issuance,” Chairman Choi was quoted asserting, adding that:
In the case of ICOs in Korea, there is a problem in domestic law and there is a high risk from the perspective of protecting investors.
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Images courtesy of Shutterstock, Korean Financial Daily, and Kakao.
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