South Korea announced a broad ban on initial coin offerings on Friday, following the lead of China, which banned the practice earlier this month.

"The Financial Services Commission said all kinds of initial coin offerings (ICO) will be banned as trading of virtual currencies needs to be tightly controlled and monitored," Reuters reports. Anyone who issues ICOs in South Korea will face "stern penalties," Korean authorities announced.

"There is a situation where money has been flooded into an unproductive and speculative direction," said Kim Yong-beom, vice chairman of the commission.

In recent months, people have raised tens, and sometimes hundreds, of millions of dollars by selling newly created virtual currencies. Some of these currencies seem like they could solve real problems—like creating more efficient file storage. But others have more of an ouroboros quality: blockchains that help people put their blockchains on a blockchain. In recent months, even many blockchain supporters have told me they're worried we're in the midst of an unsustainable bubble.

Governments around the world have been reacting skeptically to this speculative boom. In July, the US Securities and Exchange Commission issued a ruling that an ICO called the DAO had violated securities law. However, the SEC declined to press charges in that case, and it didn't have much to say on the legality of ICOs more broadly.

The risk for cryptocurrency boosters is that the Chinese and Korean decisions could become a template for the rest of the world. Few western countries were likely to follow the lead of China alone, but the Korean decision could lead other Asian countries to look seriously at regulating cryptocurrencies more strictly; Japan is reportedly working on its own overhaul of cryptocurrency regulations, and it could decide to follow China and South Korea's lead. That, in turn, could put pressure on European and American regulators to regulate ICOs more strictly.