Korea's Largest Internet Firm Kakao Is Running a Crypto ICO That Is Not Subject to SEC Scrutiny

Kakao, South Korea's largest internet conglomerate that operates applications and have nearly a 90 percent dominance in their respective markets, is running an Initial Coin Offering to raise funds for its blockchain project called Clay.

On Nov. 19, The Hankyoreh - a business-focused mainstream media outlet in South Korea - exclusively reported that Kakao is planning to raise around $300 million to develop its own token.

As a private sale, only registered, accredited and approved institutional investors are allowed to invest in the token sale of Kakao.

Ground X is based in Tokyo, Japan, and the decision to legally establish its blockchain initiative in Japan instead of South Korea by Kakao was likely a strategic move to circumvent various regulatory hurdles pertaining to cryptocurrencies that still exist in the country.

Whether the ICO conducted by Kakao is a private sale or a public sale, because policies in South Korea remain undetermined, the firm cannot risk being in conflict with local regulations by prematurely conducting a private sale with institutional investors.

In July, Choi Jong-ku - the chairman of the FSC, South Korea's main financial watchdog - disapproved of Kakao's initial plans to run a public ICO and opposed the idea of Kakao completing a token sale in overseas markets.

The token sale conducted by Kakao and Ground X falls under the newly created category by the FSA as a private sale aimed at institutional investors.

The local cryptocurrency and blockchain space has seen progress, but multi-billion dollar companies like Kakao are leaving South Korea to establish blockchain initiatives that well surpass the $100 million mark - which, in Silicon Valley, is acknowledged as a mega round.

Line, a direct competitor to Kakao as the dominant messaging application based in Japan, has also recently released a new token called LINK. The cryptocurrency and blockchain initiatives of Kakao and Line are structurally very similar.

Kakao's abrupt private token sale could potentially lead to the government of South Korea speeding up the process of regulating the local ICO market to facilitate the growth of the local cryptocurrency sector.