South Korea to Allow Issuance of ICOs

South Korea's new government is reportedly planning to introduce a new regulatory framework to allow the issuance of ICOs in the country, potentially paving the way for the lifting of a 2017 ban against such issuances.

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According to local media reports, the Presidential Transition Committee of newly sworn-in President Yoon Seok-yeol is seeking to introduce a new regulatory framework for crypto, with a view to supporting innovation and growth of the Korean digital asset space.

Under the so-called "Digital Asset Framework Act", the incoming government establish a regulatory system for classifying ICO issuances as "security type" and "non-security type", depending on the economic substance of the virtual assets.

Security type ICOs will be allowed to be issued in accordance with the Capital Market Act, subject to investor safeguards being in place, and potentially using the regulatory sandbox framework to guard against risk. Non-security ICOs, which also include utility tokens and payment settlement tokens, will be subject to a new regulatory system covering issuance, listing, and unfair trading.

According to reports,  the Digital Asset Framework Act will also establish a regulatory framework for other digital assets, including NFTs.

The Presidential Transition Committee says it wants to create a safe environment for investment in virtual assets, including through the introduction of requirements for crypto firms to buy insurance against hacks and system errors, as well as a system for recovering profits from unfair or unauthorised transactions.

President Yoon, who has promised to overhaul Korea's crypto regulations, was sworn in on Tuesday (10 May).

The incoming government has also pledged to delay plans to tax capital gains from cryptocurrencies by two years until 2025, to allow time for the proposed Digital Asset Framework Act to come into force.