GWANGJU, Nov. 2 (Korea Bizwire) — Don Tapscott, a prominent Blockchain advocate, said Wednesday South Korea’s ban on cryptocurrency and its crowdfunding scheme is “heavy-handed regulation” that can hamper innovation and the growth of startups.
An initial coin offering (ICO) occurs when firms create their own cryptocurrency and issue it to investors, rather than seek investment directly from markets or venture capital firms.
In late September, South Korea’s financial authorities said they will prohibit all forms of ICOs to address concerns of an asset bubble and potential market manipulation.
While some regulations are needed to curb speculative activities, the CEO of the Tapscott Group and co-founder of the Blockchain Research Institute said the comprehensive ban on all types of ICO token sales would be a “mistake.”
“This is a valid source of capital and it’s critical to build entrepreneurship and innovation in any economy,” the co-author of the bestselling book “Blockchain Revolution” said in a group interview. “We certainly shouldn’t prohibit this new way of entrepreneurs raising money.”
“A lot of these ICOs are for companies that will fail. So what? One out of 10 venture capital companies is successful, and some of these are fraud,” he said. “But criminals always use new technologies before anybody else.”
The Canadian futurist was speaking on the sidelines of an electric power exhibition hosted by the state-run Korea Electric Power Corporation. The Bitgaram International Exposition of Electric Power Technology (BIXPO) kicked off its three-day run on Wednesday in Gwangju, 330 kilometers south of Seoul, bringing together about 3,000 global electric power experts and company officials.
Billions of dollars in real money have already been used to buy cryptocurrency in the form of ICOs and the total market capitalization of cryptocurrencies has surpassed $160 billion, according to industry data.
“The (South Korean) government is right to be concerned that there is a legitimate need for regulation, because there is,” the 70-year-old said. “But you can’t have heavy-handed instruments or regulation because that will hurt the economy.”
With the fast rise of the new digital infrastructure, several nations have offered guidance on regulating cryptocurrencies. The U.S. government has declared that ICO tokens are subject to federal security laws, while Switzerland and Singapore have become popular destinations for startups seeking to raise funds using tokens.
Tapscott said South Korea should also find ways to better regulate the new technology to attract liquidity to innovative technology sectors.
“This year, ICOs have more money than all of the venture capital. So this is a historic opportunity for a country like Korea,” he said.
Instead of closing the pipelines for venture companies, the expert suggested the government craft relevant regulations in accordance with the nature of cryptocurrencies.
While “equity tokens” representing ownership of an asset, such as debt or company stock, need financial regulations, “utilities tokens” such as carbon credits and royalty points do not need new laws for regulation, he said.
“Every major country in the world has adequate laws today to cover criminal activities. So if you commit a crime, you should be arrested,” Tapscott said. “You don’t need new laws for utilities tokens.”