South Korea bans raising capital through new cryptocurrencies

Kim Yong-beom vice chairman of the Financial Services Commission talks during a meeting on cryptocurrencies on Sept. 29 in Seoul

South Korea had issued strong warnings regarding ICOs around the time China announced its own full ban on the practice. News of the ban roiled the cryptocurrency market however, sending Bitcoin and other digital currencies such as Ethereum plunging to multi-month lows.

The move puts Switzerland in line with authorities casting a sharper eye on the new crowdfunding method, which has let digital currency entrepreneurs raise millions quickly by creating and selling digital "tokens".

ICOs have become an increasingly popular way to raise money for companies not large enough to raise capital through an initial public offering of stock.

The announcement triggered a sell-off in crypto markets.

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ICOs have fueled a rapid ascent in the value of all cryptocurrencies, from about $17 billion at the start of the year to a record high of close to $180 billion at the beginning of September.

Bitcoin fell as much as 3.5%.

According to Ms. Szetho, an ICO is a nuanced subject matter when it comes to regulatory provisions because they could potentially be classified as one of a variety of financial instruments, depending on how the tokens are designed.

"At any sign of vulnerability, the first reaction would be a mass selloff in ether".

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Meanwhile NXC, the owner of gaming company Nexon, recently purchased a majority stake in Korean cryptocurrency exchange Korbit in an United States dollars 80 million deal.

In lockstep with the ban South Korean regulators have vowed to further inspect all cryptocurrency exchanges for any violations of the ban, which according to the Wall Street Journal extends to sophisticated margin trades as well, or buying digital tokens with borrowed money.

This month, authorities also indicted four people on charges of illegally trading cannabis using bitcoin, the commission said.

Regulators across the world, including the U.S., Singapore, Hong Kong and United Kingdom, have warned companies contemplating an ICO that they may violate securities laws.

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"It would shock me if you don't see pump-and-dump schemes in the initial coin offering space", US Securities and Exchange Commission chairman Jay Clayton said on Thursday in Washington.

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