What is an ICO?

An ICO is an initial coin offering.  It is not like an IPO (initial public offering).  IPOs are regulated.  ICOs, on the other hand, are not regulated by the government.  An ICO is when a company attempts to raise funds, similar to crowdfunding, by distributing tokens to their investors.  It is seen as an innovative way of engaging with the community.  People can invest in a company’s funds for distributed shares.

Why is the South Korean Government Afraid of ICOs?

South Korea has a history of fraud and corruption.  There are undoubtedly scammers out there that will make false companies with false products and services.  This can result in people investing in a worthless company.  However, I feel it should be up to the investor to make the right decision.  It almost seems as if the South Korean government does not believe in their own citizens to make rational and informed decisions when it comes to investing.

Will South Korea Reverse its ICO Ban?

If South Korea reserves its ICO ban then ICOs will become heavily regulated.  The main goal of the South Korean government is to protect investors in the early stages.  I do feel the ban will not last for long.  The most likely outcome in South Korea is that the ICO ban is only temporary.  During this time the market will settle down and the South Korean government will work on regulations for consumer protections.  Once they step up these regulations, look for the South Korean government to take a step back and see how it works out.

We need to pay close attention to China.  If China decides to bring back ICOs then South Korea will watch closely to see how China does it then follow suit.  If you are tired of seeing South Korea follow China, you are not alone.  It goes to show that South Korea is not the powerhouse it thinks it is.  That can clearly be seen in how they are dealing with cryptocurrencies.  Korea will be holding their elections on June 13th.  Depending on who gets elected, a clearer picture of ICOs in Korea will be shown.

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Cryptocurrency in South Korea and the trading of cryptocurrency is a lot more sophisticated than in other countries.  If you are looking for reasons why cryptocurrency prices have been so volatile look no further than South Korea.  Nearly 20% of all cryptocurrency trading happens in South Korea.  This 20 % is not just comprised of institutions but your average Korean citizen.  Most go to exchanges like BitThumb, Korbit, or Coinone.  There are even trading locations that make trading easier than ever with customer service desks where you can buy and sell cryptocurrency.  You can sit on a couch and watch prices on a big board and access ATMs to liquidate your digital currency for cash.

The Rise and Fall of Cryptocurrencies in South Korea

South Koreans are also flocking to trading apps.  This is a powerful trend in a country where smartphone ownership rates are some of the highest in the world.  It is one reason demand and prices have a huge premium in South Korea.  Some premiums went as high as 40%.  This gave global cryptocurrency traders a chance to arbitrage.   A lot of people made millions by taking advantage of the price difference.  But with the boom comes uncertainties such as regulations and rumors of trading bans.  South Korean regulators are grappling with ways to forge a coherent regulatory policy.  This means that for traders it has been one headache after another.  There have been reports of accounts actually being frozen.

South Korean Government Stepping In.

The South Korean government has begun taxing bitcoin profits and requiring more disclosure of account identities to keep underage kids and potential money launderers from trading.  This is a kind of balancing act between encouraging innovation and making sure today’s crypto traders are not doing anything illegal.

The crypto surge is not a US lead phenomenon.  South Korea is a really good example of this.  Most cryptocurrency investors got into it in 2013 or 2014 and they are more focused on the blockchain technology that could potentially one day change commerce.  However, time will only tell if that long-term technology catches up

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South Korea’s finance minister Kim Dong-yeon has announced the country will not be planning to ban cryptocurrency trading.  The price of bitcoin in Korea continues to fall.  Meanwhile, news has come out about $600 million of illegal trading has been going on in South Korea.  However, the news that the Korean government will not ban cryptocurrency trading is a great sign for investors who were worried that it would get shut down in Korea.

Positive Signs for Bitcoin in Korea

So South Korea is not going to ban bitcoin and other digital currencies.  All they are going to do is regulate it.  This should, in the long run, make it easier for residents and investors to get involved with cryptocurrency.  So in a way, this could be good news for bitcoin in Korea.  As more regulations are implemented for cryptocurrencies, the more people will trust it and use it.  This is going to make mass adoption a whole lot easier.

With all the news recently regarding Facebook’s banning of cryptocurrency ads and the security breaches in Japan.  It is great to hear at least some good news coming out of this industry.

A Change of Heart

Weeks ago there was a huge uproar in Korea after it was implied that the Korean government was going to ban cryptocurrencies in Korea.  It seems the Korean government has now taken a U-turn.  It is just looking like they want to regulate the industry.  Many feel this news is one of the main reason why Bitcoin’s value dropped close to 50% this month.  Koreans were selling bitcoin like crazy.  There was a petition of over 200,000 signatures to make sure Bitcoin and other forms of cryptocurrency are not banned.

Now the Korean government is in the process of setting up regulations for cryptocurrency trading.  The main concern in the Korean government in regards to bitcoin is its illegal use and anonymous trading.

“The customs service has been closely looking at illegal foreign exchange trading using cryptocurrency as part of the government’s task force,” a statement from the Korean government announced.

It will be interesting to see where Korean Banks such as Kookmin, Shinhan, Woori, etc stands in regards to accounts for cryptocurrency exchanges.  That is will the next step after the Korean government sets the regulations and standards.

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Obviously, the U.S. is the furthest ahead when it comes to SaaS adoption when it comes to companies really enabling technology to help their companies.  In Asia, now we are starting to see that push to be able to:

A) use products

B) be actually able to build products

One of the challenges of actually building a SaaS product is that it is not something that takes 3 months.  You can’t just go out and put an app together when you are in the app store.  It is something that takes a year, two, or sometimes 4 years to be able to build a product that a business is able to use and reliably run their business on.  That is one of the biggest challenges of building a company in a SaaS space.  It takes time to get it to market.  People have to have patience and people also have to have the money.  So for any company it is crucial to understand the customer and the time that it takes to build the product.

Adopting SaaS in South Korea

As we have seen in Korea, Taiwan, and even Singapore as well, conservative decision makers tend not to bring new products into the organization very quickly.  In Korea, for example, there are many CEOs that want to stick with what brought them there.  That creates challenges for the organization when it comes to bringing a new technology into the business.

Decision making in places like South Korea is obviously very top heavy and that is starting to change a little bit.  Productivity is secondary often to the decision-making process inside an organization which reduces productivity.  I think SaaS is going to help that but it is really going to have to start at the top and work its way down.  Unlike the U.S. where products like Slack that have really been a bottom-up process that has feed into the organization.

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Bitcoin is backed by nothing

I feel that for money to actually be money it needs to be backed by something tangible.  Currency is usually backed by the government and in the case of the United States, it is backed by gold.  Even gold has the value that it has because it can be used for products such as jewelry.  So even if it loses its value, it will still hold some kind of value because it can be used for something.  The same can not be said of Bitcoin.  It is backed by nothing.

Why is the South Korean Government Trying to Regulate Bitcoin?

Why does Bitcoin hold so much value?  What Bitcoin provides is anonymity.  The ability to use it to do illegal activities.  China saw the corruption behind Bitcoin use and put a stop to it in late 2017.  What Bitcoin is showing to the world is that people want to do illegal activities if they can get away with it.  This is why so many people are curious about not only Bitcoin but all cryptocurrencies.  The reason why cryptocurrency prices are always up and down is that no one knows what the market price should be.  That is why we don’t see 40% changes in any other market.  This is something that can last long term.

South Korean Government is Worried About Bitcoin Collapse

Clearly, there are members of the South Korean government that feel Bitcoin is about to collapse at some point.  They don’t know when that bubble will pop.  Therefore that uncertainty of when it will pop has them scared to fully embrace Bitcoin in South Korea.  As the South Korean government puts more regulation on Bitcoin, Asian investors will look to other investments.  The main cause of the rise of Bitcoin, in my opinion, is with the Asian investors.  For example, once China got rid of digital currency exchanges the price of Bitcoin fell 25%.  Once all the Asian investors move away from Bitcoin will we see Bitcoin TRUE pricepoint.

South Korean Government can Kill Bitcoin in Korea.

If the South Korean government wanted to, they can kill Bitcoin in Korea.  They haven’t because the South Korean government knows that Bitcoin in South Korea is not truly anonymous.  You will have to store it on a server and all transactions are recorded on a public ledger.  This is why the South Korean government rather than killing Bitcoin is setting up regulations to make sure real names are associated with trades and exchanges.

Bitcoin is not the Future of Money

Bitcoin in South Korea is too volatile to be an alternative to real money and it is not backed by anything.  Cryptocurrencies of the future will be backed by SOMETHING, like gold.  Gold is the ultimate standard and if that enters the market, that will the best investment potential.  If South Korea truly wants to be the Fintech hub of the world they need to make their own cryptocurrency which is backed by gold.  Korea should let the way and be innovative when it comes to digital currency.  Instead of setting up barriers and regulations they need to be researching and innovating.

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