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Korea's Recently Approved Crowdfunding Regulation

7/16/2015

 
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Last week, South Korea passed a law called the “Financial Investment Services and Capital Markets Act”, which allows and simplifies equity online investing and reward crowdfunding.


Despite its limited dimensions - especially compared to those of other countries around the world,crowdfunding is not new to Korea. In fact, since 2007 has been used as a way to finance mostly artistic production, through donation crowdfunding websites. Peer-to-peer lending also shows relevant numbers and increasing popularity, due to the fact that it is not subject to any regulation, as long as it is direct lending between borrowers and lenders.

However equity and reward crowdfunding were almost impossible to implement in the country because of its existing heavy regulations called the Capital Market Act and the Act for Consumer Protection in Electronic Commerce. These legal frameworks are making it burdensome for both issuers and portals to fundraise and operate.

The new “Financial Investment Services and Capital Markets Act” is now making both online investing and reward crowdfunding possible. With regards to reward crowdfunding, the local Financial Services Commission limits individual investments to 5 million won (approximately $4,400) per offering in any 12- months period.

The regulatory change has been under discussion for the last couple of years and it aims at giving a push to innovative startups and projects in the country, as well as helping creating new jobs.


References

Alois, JD. (2015). Korea Legalizes Investment Crowdfunding. Crowdfundinsider

Crowdfunding in Korea. UC Berkeley International Symposium on Crowdfunding (2013).

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About the author - Irene Tordera

Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.




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