A South Korean crowdfunding company has suggested a novel idea of exploiting the current legal loophole to issue initial coin offering (ICO) in defiance of the current ban.
Kim Joo-won, CEO of the Crowdy, said blockchain companies could issue ICOs by using the Online Small Sum Investment Brokerage Act, which the National Assembly passed in August 2015.
Under the act, the ICOs are possible, he claimed. However, his company will provide rewards, including company products, to investors in return for the investment. This is to respect the current law, he said.
Once the ICO issuers provide reward tokens to investors in appreciation of their financial support, namely investment, it is legal, according to his interpretation. He claimed that once his company issues ICOs under this law, the government could not punish us for violating the law. He said South Korea is a law-abiding country.
He said his company would provide utility-type tokens to investors to bypass the current securities law. If the company offers securities-type tokens, these tokens are subject to the securities law. Any company issuing securities and other derivatives including convertible bonds must get approval from the Financial Supervisory Service.
He said he would prepare for the crowdfunding for ICOs. However, it is unclear whether the government will permit his plan. Under the current law, no ICOs, namely issuing cryptocurrency for mobilizing funds, are possible in South Korea.
Many cryptocurrency startups have difficulty in financing the development of their technologies. They have difficulty in borrowing money from financial companies. They are unable to raise fund through ICOs. Investors have no way of getting protection when their investment in blockchain ventures turn sour.
