While Swiss financial watchdog FINMA announced it is investigating a number of initial coin offerings (ICOs) for possible breaches of Swiss law, South Korea has decided to ban the crowdfunding method altogether.
According to news from Reuters, the Swiss investigation is the second crackdown in less than two weeks by FINMA and could lead to greater regulatory oversight of some of the most prominent blockchain projects in “Crypto Valley,” located in Zug, Switzerland.
“FINMA has observed a marked increase in initial coin offerings conducted in Switzerland,” it said. Switzerland is the latest nation to take a harder look on this new crowdfunding method, which allows cryptocurrency entrepreneurs to raise millions by creating and selling digital “tokens.”
Just weeks after China banned ICOs, South Korea announced today that it is following suit, with its regulator stating that ICOs for bitcoin and other cryptocurrencies are pushing the market into a “nonproductive speculative direction.”
Several regulatory bodies, including those in the U.S., China, Hong Kong, Singapore and Russia, have warned that lack of regulations has made ICOs popular with scammers. This month, FINMA closed down what it said was the provider of a fake cryptocurrency, stating that it was investigating around a dozen other possible cases of fraud.
Right now, Switzerland does not have rules governing conduct specifically for ICOs. But depending on how an ICO is structured, some parts of the procedure may be covered by existing regulations, FINMA said.
The Crypto Valley Association has issued a statement supporting ICO regulation and said it is working with its members on developing an ICO code of conduct.
“Bottom line, we welcome that the Swiss regulator is taking action and recognizes the need for clear guidance and oversight, especially with regards to KYC (Know Your Client) compliance, while also fostering innovation,” Oliver Bussmann, president of Crypto Valley Association, said.
Switzerland has hosted four of the six largest ICOs to date, including a record-breaking “token gathering” by Tezos, which raised the equivalent of $230 million to $240 million in bitcoin and Ethereum in July. Bancor Protocol, a Zug-based foundation enabling the creation of other cryptocurrencies, raised over $150 million in June.