South Korean financial watchdogs are contacting domestic blockchain startups as part of an investigation into initial coin offerings (ICOs).

According to an exclusive report from CoinDesk Korea, the probe is causing jitters among the firms over whether it could ultimately lead to some form of sanctions if firms are considered to have broken rules on token sales. Currently, ICOs are technically not allowed, since the token-based funding method was banned last September.

As revealed in a questionnaire from the Financial Services Commission – obtained by CoinDesk Korea on Wednesday – the Financial Supervisory Service (FSS) has already sent letters to several companies asking them to cooperate with the investigation. The FSS is a regulator that supervises financial institutions under the oversight of the FSC.

The questionnaire consists of 52 questions, requiring specific information such as shareholder status, countries where an ICO is in progress, the amount of tokens allocated to domestic residents in any ICO, and the reasons for conducting an ICO overseas.

However, rather than an effort to clamp down on token sales, an official from the FSS told CoinDesk Korea it is reaching out “to understand what the contents of the contract, business plan, and white paper are, if it has any.”

They continued:

“It is not for sanctions. This is to grasp the current situation. … It is important to look at investors’ ability to report on investments, and to provide a system for ICOs.”

Regarding a possible regulatory framework for ICOs, the official said, “We are trying to figure out the real situation because we can not just [ignore the issue] as ICOs are going on in foreign countries.”

A lawyer who had advised a blockchain firm that has recently completed an ICO said they were skeptical about the intentions behind the investigation, when asked by CoinDesk Korea. They further expressed unease that the investigation would disclose company information that is “not normally open to the general public.”

Korean won image via Shutterstock