The financial authorities of Korea are preparing a plan to allow initial coin offerings (ICOs) for domestic investors, to advance blockchain-based technologies, according to sources familiar with this issue.
The plan will be a major reversal because the government banned ICOs last September, claiming cryptocurrencies were neither money, nor currency or financial products.
Despite this, the administration has yet to implement the ICO rule and hasn’t forced companies to return ICO funds. Local investors are also allowed to put money into foreign ICOs and cryptocurrency exchanges operating within the country.
Kang Young-soo, who oversees cryptocurrency trading policies at the Financial Service Commission (FSC), said the country’s top financial policy regulator has yet to decide whether to allow ICOs in Korea for domestic investors and companies.
Another source familiar with the country’s tax code said he expects the order banning ICOs would only be reversed after the country fixes the legal groundwork for crypto-trading.
According to this source, various scenarios such as the imposition of value-added tax, a capital gains tax, or both on trade; and the collection of corporate tax from local cryptocurrency exchanges, as well as the initiation of authorized exchanges with licenses are being discussed. He also added that allowing ICOs should involve local banks, the justice and finance ministries, and the tax agency to create transparency because this will allow the government to track the history of investments into ICOs.
ICOs are used by startups to raise funds with cryptocurrencies which work through blockchain technologies. In Korea, some startups used ICOs as they require little paperwork, letting companies solicit money directly from investors. When the ICO ban was announced, local startups said they would raise funds overseas.
A trend taking place is that the number of investors interested in ICOs is rising significantly. Also, with increased transparency, more investors will be able to make better investment decisions when it comes to the offerings. Some analysts say this is the reason companies are gaining larger investments in shorter time periods.
Kang said the country has no plans to regulate cryptocurrencies and blockchain technologies, while it tries to work out how to regulate the market.