Crypto exchange Coinone temporarily suspended the token crowdfunding scheme it had been pushing for with Crowdy, a crowdfunding platform. The reason is that Coinone feared that its assistance in token crowdfunding might be seen as engaging in initial exchange offerings (IEOs).

Token crowdfunding refers to a scheme in which blockchain projects raise funds in the form of crowdfunding and give tokens in return for contributions. Under existing laws, it’s impossible to penalize reward-type initial coin offerings (ICOs), not security-type crowdfunding.

So Coinone and Crowdy agreed to join forces for the token crowdfunding and announced Monday that they would help KStarLive’s funding as their first project. Under the agreement, Coinone was supposed to review the project and provide investment information while Crowdy was to offer a funding platform.

However, Coineone opted for the temporary suspension for fear that this scheme might make it look like an IEO brokering token sales in person. Because IEO is a fund-raising scheme done through cryptocurrencies, the government’s position on banning ICOs might be applied to IEOs.

A Coineone official emphasized that the token crowdfunding is never an IEO, saying, “Coinone’s research center only offers analysis information on the project and Coinone does not broker token sales and ensure the listing of the relevant project.” “But we decided to halt the scheme temporarily because of some misunderstanding about that.”

Against this backdrop, critics say that blockchain projects or companies have no substantial ways to raise seed money domestically. That’s because aside from the fact that ICOs are prohibited, token crowdfunding cannot be an option at a time when IEOs could trigger legal problems.

Crowdfunding envisions meticulous identification procedures, causing such funding platforms as Crowdy to review financial statements and verify criminal record. Nonetheless, if cryptocurrency is used in crowdfunding, funding could be difficult because of uncertain regulations. When Crowdy announced its collaboration with Coinone earlier, Crowdy CEO Kim Ju-won stressed that crowdfunding could be an option for blockchain-focused companies to raise capital, saying, “We hope to introduce good blockchain projects to the public and contribute to the development of the blockchain industry through token crowdfunding.”

Coinone indicated that the absence of clear regulations affected its decision to suspend token crowdfunding, saying, “There were no other factors except for that.” /hyun@decenter.kr

사동석 기자

sahds@dcenter.kr