Over the past few months, some of the largest businesses in the global cryptocurrency market including cryptocurrency exchanges Binance and Bitfinex, and multi-billion dollar blockchain project Tron have either moved out of Asia or are actively planning to permanently relocate to countries in Europe, due to the strict and impractical regulations imposed by governments within Asia.

South Korea’s Ban on Domestic ICOs

In January, the South Korean government and local financial authorities banned domestic initial coin offerings (ICOs) with an intent to protect local investors and traders in its cryptocurrency exchange market. To this date, local investors are not permitted to invest in domestic ICOs and token sales, but are still allowed to trade tokens of overseas projects, such as EOS and Storm.

At the Deconomy conference held in Seoul participated by many of the leading experts in the cryptocurrency sector such as Ethereum co-founder Vitalik Buterin and Lightning author Joseph Poon, Bitcoin.com CEO Roger Ver emphasized that the government’s intent behind its regulations and initiative is of less importance, and that they should be judged based on the results of their regulations. Quoting economist Milton Friedman Ver said, “one of the great mistakes is to judge policies and programs by their intentions rather than their results.”

Prior to its ban on domestic ICOs, the South Korean government dismissed the possibility of its largest internet conglomerates in entering the cryptocurrency market and eyeing ICOs as an efficient fundraising method.

Kakao, South Korea’s most dominant internet company that operates KakaoTalk, KakaoPay, KakaoTaxi, KakaoStory, and KakaoStock, all of which have over 80 percent market share in their respective markets, revealed that it will be running an ICO in the future and establish a blockchain venture in the short-term. But, due to the South Korean government’s impractical regulations, Kakao stated that it will migrate its blockchain department to regions with friendlier regulations such as Switzerland.

In consideration of the massive popularity and success of the ICO of Telegram, the South Korean government and the local blockchain sector realized that they could potentially lose out billions of dollars if Kakao permanently relocates its blockchain company outside of South Korea. Acknowledging the potential opportunity cost of dismissing the ICO market, South Korean financial authorities stated that it will legalize domestic ICOs in the short-term, as soon as taxation policies are passed.

Two sources within the South Korean government who are actively cooperating with the Financial Services Commission (FSC) to legalize ICOs told Korea Times in an interview.

“The financial authorities have been talking to the country’s tax agency, justice ministry and other relevant government offices about a plan to allow ICOs in Korea when certain conditions are met.

Various scenarios such as the imposition of value-added tax, a capital gains tax, or both on trade; and the collection of corporate tax from local cryptocurrency exchanges, as well as the initiation of authorized exchanges with licenses are being discussed.”

China’s Complete Ban

The Chinese government has no intentions to allow ICOs in the near future, and it remains unclear whether it will enable cryptocurrency trading within 2018. Analysts previously predicted that the Chinese government’s abrupt crackdown on cryptocurrency trading was a result of the initiative by President Xi Jinping to appeal to the communist party before his re-election. Given the recent success of the Xi administration, it is possible that cryptocurrency trading and ICO investment could get legalized by the People’s Bank of China (PBoC).

Currently, local banks are not permitted to deal with cryptocurrency businesses and exchanges, and local investors are not allowed to invest in any cryptocurrency within China.

The Chinese blockchain sector remains relatively optimistic for the long-term future of the Chinese cryptocurrency market however, as the Chinese government has began to allocate billions of dollars to facilitate the growth of the blockchain sector.

Follow Joseph Young on Twitter: @iamjosephyoung