South Korean ICO Industry Still Going through Beginning Stage

Jul 11, 2018

South Korean ICO (Initial Coin Offering) market has just entered its beginning stage as financial authorities have been regulating ICOs very strictly.
Many ICO companies are pushing for their corresponding projects by setting up corporates in foreign countries such as Switzerland and Singapore. Although it is uncertain how many South Korean ICO companies have set up corporates in foreign countries, it is heard that there are more than 100 companies that are preparing ICO in foreign countries. Startups, ICT (Information Communication Technology) companies, and small and medium companies in various fields are preparing for reverse ICO by incorporating blockchain technology to their current businesses.
‘ICON’, which was introduced by Theloop, has accumulated $40.3 million (45 billion KRW) of fund by carrying out ICO in Switzerland. It is considered as one of the most successful South Korean ICO company. Glosfer’s HYCON, Hyundai BS&C’s HDAC, and XBLOCK Systems’ had also carried out ICO in Switzerland. Zper and MediBloc are carrying out ICO in Hong Kong.
Zikto, which has been making healthcare wearable devices, issued ‘Insureum’ and it has attracted more than $17.9 million (20 billion KRW) of investment just from private equity sales from institutional investors. As a result, it did not have to do public sales for normal investors that it was going to do initially.
Although South Korean ICO companies are carrying out ICO in foreign countries, it is heard that there is significant amount of funds involved from South Korean investors. Not only institutional investors with huge amount of funds are participating in investments, but there is also an increasing number of personal investors who are looking to gain profits. Usually, distribution of information takes place through open chatting rooms of official mobile messengers that are operated by ICO companies. Investors start to gather after hearing rumors from cryptocurrency communities and others. Proxy sites for foreign ICO investments and group purchase sites have become very popular recently as well.
However, number of frauds that pretend to be proxies for ICO investments has increased rapidly as there are rumors about people who have made fortunes from foreign ICO investments. Some of these frauds trick investors with cryptocurrencies that are supposed to be issued by popular companies such as Kakao and Bithumb and disappear after getting money from them. There are no clear regulations on cryptocurrency or ICO in South Korea. It is also difficult to be compensated when there are fraudulent acts involving cryptocurrency or ICO. Even when investors show records of their cryptocurrency wallets or breakdown of their cryptocurrencies, it is difficult for them to prove that they suffered financial damages.
As a result, some say that people need to be careful with reckless ICO investments because market value can be different with expectations after exchanges become listed. Possibilities of cancelled projects and stagnant exchange volume due to lack of business value cannot be ignored as well just like an incident involving deadcoins.
“ICO is receiving spotlight as an easy way for startups to raise funds.” said a representative for a blockchain industry. “However, there can be huge financial loss if one were to invest into ICO companies just by looking at market values and not marketability, business value, and technical skills.”
Staff Reporter Park, Jungeun | jepark@etnews.com

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