The Korea Times, a business-focused mainstream media company founded by Hankook Ilbo, one of South Korea’s largest newspapers, reported that the South Korean government will soon reverse its ban on initial coin offerings (ICOs) and allow token sales with certain conditions.
Last year, the South Korean government imposed a ban on domestic ICOs, disallowing local investors from investing in ICOs launched within the country. Consequently, many blockchain projects left South Korea to regions like Switzerland, that have introduced friendly regulatory frameworks for cryptocurrency businesses and ICO projects.
This month, South Korea’s biggest internet conglomerate Kakao, which operates the country’s most widely utilized messaging platform, taxi service, and fintech application in KakaoTalk, KakaoTaxi, and KakaoPay, told Asia Business, a business-focused media company in South Korea, that it is planning to integrate cryptocurrencies like bitcoin and Ethereum into KakaoPay, to allow 12,000 merchants and millions of users to utilize cryptocurrencies as a payment method.
Kakao also hinted the launch of a cryptocurrency of its own, which will likely operate in a similar manner as Binance Coin, the token deployed by the global market’s largest cryptocurrency exchange. But, due to the imposition of a domestic ICO ban, Kakao representatives stated that it will likely conduct its ICO elsewhere, outside of South Korea, to circumvent local regulations.
A source within the South Korean government familiar with the matter told The Korea Times:
“The financial authorities have been talking to the country’s tax agency, justice ministry and other relevant government offices about a plan to allow ICOs in Korea when certain conditions are met.”
Over the past few months, the South Korean government has expressed two major concerns regarding the local cryptocurrency market: taxation and anonymity. The government has already taken various measures to prohibit anonymous accounts from trading cryptocurrencies, especially using the South Korean won. It has also banned foreigner from trading cryptocurrencies, as a part of an initiative to lower the premium in the South Korean cryptocurrency market.
But, the government has struggled to decide on the taxation policy for the local cryptocurrency market and investors within it. Several mainstream media outlets in South Korea hinted that local cryptocurrency exchanges and banks have started to send information to the National Tax Service, especially if large trades or suspicious activities are discovered.
Another source told The Korea Times that the government is willing to allow ICOs and investors to participate in token sales if the government can access data on the inflow of capital from both individual investors and retail traders into the ICO market.
“Various scenarios such as the imposition of value-added tax, a capital gains tax, or both on trade; and the collection of corporate tax from local cryptocurrency exchanges, as well as the initiation of authorized exchanges with licenses are being discussed,” the source told The Korea Times.
The legalization of ICOs, which is still relatively far from being finalized, could allow domestic blockchain companies and ICOs such as ICON (ICX) to operate with complete freedom, without being in conflict with existing regulations.