South Korea Bans Sales of New Cryptocurrencies
The South Korean government recently banned initial coin offerings (ICO), which is the process how most cryptocurrencies get started. The country's Financial Services Commission said that all ICOs are banned in order to better control and monitor currencies.
“Raising funds through ICOs seem to be on the rise globally, and our assessment is that ICOs are increasing in South Korea as well,” the regulator said in a statement after a meeting with the finance ministry, the Bank of Korea and the National Tax Service.
The news led to a 2 percent fall in Bitcoin value and even more of a fall in Ethereum which serves as the main virtual currency of ICOs.
The move comes after China imposed similar restrictions. Earlier this month, the central bank of China banned ICOs, causing a crash in the value of bitcoin by 30 percent. This came shortly after the currency hit record high values of almost $5,000. Despite bouncing back, the currency would take a hard hit if other countries followed in the footsteps of China and South Korea. The largest reason for China banning ICOs was the large risk taken by investing in them. Thousands have been scammed by pump-and-dump schemes.
The 'money of the future.'
Governments in Asia are the first to take serious precautionary action against cryptocurrencies. However, businesses throughout the world are voicing their concerns about the 'money of the future.'
CEO of JPMorgan Chase & Co. Jamie Dimon called bitcoin and similar currencies "fraud" during an event earlier this month. He also said he would fire anyone at his bank who decided to trade in it. "I'd fire them in a second," he said. "For two reasons: It's against our rules, and they're stupid. And both are dangerous."
Other entrepreneurs call for harsher regulations on the fledgling new currencies. Brad Garlinghouse, a former Yahoo exec and CEO of Ripple, was less forgiving of lax policies.
"Heavily regulated markets are typically heavily regulated for a reason," he said. "Frauds are happening, people are going to jail."
Even Peter Smith who founded Blockchain -- the precursor to Bitcoin and other cryptocurrencies, and whose company laid the industry's technological foundation -- has hesitancy. He said rip-offs will exist and people will get exploited; it's inevitable.
"We’re cautious about it in the short term," Smith said of his company in an interview with Fortune. "But you have to temper that with the idea that every new technology is going to be like that in the beginning."
The Case for Bitcoin
Fears surrounding cryptocurrencies haven't stopped successful investors in trying out the trend. After all, investing is the same regardless of the market. It's all a risk, according to macro manager with Fortress Investment Group Mike Novogratz.
"In a lot of ways, this is a market like any other market," Novogratz said in an interview with Bloomberg. "You see the psychology of fear and greed in the charts the same way you’d see it in charts of the Indonesian rupiah or dollar-yen or Treasuries. They’re exaggerated because of less liquidity and because you can’t get short."
For Novogratz, however, the investment paid off. He bought $500,000 at less than a dollar on the Ethereum network. After he came back from vacation, the price had gone up fivefold. He eventually sold enough ether to make $250 million. He told Bloomberg that was the single biggest trade in his whole career.
No word yet if the bans placed by both the Chinese and South Korean markets will be permanent. However, there could easily be a few more countries following in their footsteps until blockchain technology and ICOs prove themselves to be less of a risk to the average consumer.
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