South Korea clamped down on initial coin offerings (ICO) Friday, banning the practice of cryptocurrency crowdfunding, often used as a source of capital for startups.The decision, announced in Seoul after a meeting of the cryptocurrency task force, hit the price of bitcoin, which fell by around 2 percent. Ethereum — whose protocol many ICOs rely on — fell by 5 percent.“We are worried about adverse effects such as increased risk of fraud, [so] the ICO will be prohibited in all forms,” Kim Yong-bum, vice chairman of South Korea’s Financial Services Commission, said during the meeting.China imposed a similar ICO ban earlier this month. The U.S. Securities and Exchange Commission (SEC) has promised greater scrutiny of the practice, but stopped short of implementing a ban.ICOs have become a popular as a way for businesses to raise millions of dollars in a short space of time, but critics say they leave investors open to fraud.“It would shock me if you don’t see pump-and-dump schemes in the initial coin offering space,” SEC Chairman Jay Clayton said Thursday.Beijing has sought to exert control over the booming cryptocurrency market in China, fuelled by a massive interest in Bitcoin. Despite the ban, the decentralized nature of the currency has ensured the market in China remains vibrant.While much of the world clamps down on ICOs, Russia is embracing their potential. An ICO backed by an aide to President Vladimir Putin raised $37 million to build a mining operation.Bitcoin (and the blockchain technology underpinning it) work without control from a central bank, making it a headache for regulators. Users can also remain largely anonymous, making it difficult for governments to track trades.
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