The Korean government has decided to keep its blanket ban on initial coin offerings (ICOs).

The Financial Services Commission (FSC) Thursday announced the results of its fact-finding survey on ICOs, which were discussed in a meeting of vice ministers associated with virtual currencies Tuesday.

In its statement, the top financial regulator said it would remain careful about institutionalizing ICOs, taking into account that investment risks are still high and the international regulatory framework has yet to be established. “We will inform the prosecution and police of illegal cases revealed through the survey and deal with them strictly.”

The FSC clearly opposed mapping out ICO guidelines. “What the government regulates is an ICO, a fund-raising scheme. If the government offers guidelines, it could be understood as recognizing them officially and raise concerns about the revival of speculation and damage on investors,” the statement said.

The Financial Supervisory Service, the FSC’s executive organ, carried out a fact-finding survey, targeting 22 of 24 companies that conducted ICOs or revealed plans to do so from September through November. A total of 52 questions in six fields were asked and they included the status of shareholder executives, why ICOs were conducted abroad, amounts of tokens allotted for residents in Korea, progress of domestic PR activities and characteristics of tokens.

The FSC evaluated ICOs as “extremely risky,” saying that they are conducted abroad perfunctorily, transparent information on ICOs is still insufficient and some projects could be in violation of relevant laws.

According to the statement, some companies set up paper companies abroad to avoid ban on domestic ICOs. ICOs were used to offer new digital currencies but most of the companies were so small that information was too scarce.

The FSC also took issue with white papers. Contents revealed in the white papers were described comprehensively and it was difficult to understand technical terms related to blockchain and IT and figure out how the projects would proceed.

Some projects could be STO (security token offering), raising fears that they might be in violation of the Capital Market Act. That is, perpetrators may be accused of fraud for having engaged in unauthorized financial investment businesses.

“As the latest survey has confirmed high investment risks involving ICOs, investors must be cautious. Regardless of the survey, we will deal with unlawful ICOs swiftly and strictly,” an FSC official said. /edshin@decenter.kr

Shin Eun-dong