Presto, a South Korean blockchain company, has filed a case in a local court claiming that the country’s ban on initial coin offerings is unconstitutional, according to local news source Sedaily.
The action was filed on Friday.
Done nothing for a year
Kang Kyung-won, CEO of Presto, said: “As a blockchain startup, we have been hitting a snag as the government and the National Assembly have done nothing over the last one year since the government’s blanket ban on ICOs. We will ask the court to rule on the ICO ban and the legislature’s nonfeasance.”
An ICO is when a company sells newly-created cryptographic tokens to the general public. This has proved problematic because many people lose money by investing in businesses run by people who are incompetent and/or scammers. Nonetheless, people have spent billions of dollars on these things worldwide since last year.
South Korea banned the practice of raising money via ICO is September 2017, on pain of “stern penalties”. Kim Yong-Bum, vice head of the country’s financial watchdog, said at the time: “The financial authorities are banning ICOs. The intention is to prevent consumers from damaging the market because they are overheating due to a surge in demand for speculative receivables, triggered by an increase in ICO fraud.”
Presto now claims that this was unconstitutional.
Equal rights for ICOs now
Park Ju-hyun, a constitutional lawyer working for Presto, explained that the ban infringes on freedom of occupation, right to property, and right to equality. He cited Article 37 (2) of the constitution. The last is because the ban “arbitrarily discriminates against ICO companies without reason.”
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Kyung-won said that his company had been considering selling tokens via an overseas entity.
Presto is a company which helps other companies develop and sell tokens, according to its website. It also runs a decentralised exchange that they can trade their tokens on afterwards.
Specifically, it develops a contract called a ‘DAICO’, which stands for ‘decentralised autonomous initial coin offering’. This idea was invented by Vitalik Buterin in January 2018 as a way to counter blockchain companies that sold tokens for millions of dollars and then mismanaged/stole the money.
With a DAICO, the company is not allowed to use all the money at once – it is held in escrow and released according to a smart contract. Investors control the flow of money by voting, and can also cancel the whole project and get their money back if a consensus is reached.
Presto’s address is not listed on its website, but apparently it is a member of the British Blockchain Association, a non-profit advocacy organisation based in London.
“In this era of the Fourth Industrial Revolution and unbounded competition, one year or two in the science and technology community is comparable to 100 years in the past Industrial Revolution. Such unconstitutional and pre-modern measures as the ICO ban should not exist any longer,” said Kyung-won.
In May, a small group of South Korean politicians began campaigning to get the ban partially reversed, albeit only for research centres, not private companies.