The governments of Hong Kong and South Korea have decided to strengthen regulatory oversight of digital currencies in a bid to curb risks in the financial system.

In this regard, the South Korean authorities plan to boost authentication processes of virtual currencies at exchanges and monitor transaction reporting systems at banks used for virtual currency-related deals.

The authorities in South Korea also contemplated banning ICO fundraising platforms that breach the Capital Market Act.

South Korea Financial Services Commission (FSC) chairperson Kim Yong-beom said: “At this point, digital currencies cannot be considered money and currency not financial products.”

Meanwhile, the Securities and Futures Commission (SFC) of Hong Kong said that ICOs are likely to be subject to securities law of the jurisdiction.

“Whilst digital tokens offered in typical ICOs are usually characterised as a “virtual commodity”, the SFC has observed more recently that certain ICOs have terms and features that may mean that they are “securities”, the Hong Kong watchdog said.

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The regulator added that ICOs that offer ownership interests in a corporation and those used to acknowledge a debt or liability could be treated as securities and will be subject to local laws.

SFC further said that parties involved in the secondary trading of ICO tokens could also be subject to its laws.

The move by these regulators comes on the heels of a similar move by Chinese regulators.  A couple of days ago, the People’s Bank of China, China Securities Regulatory Commission, China Banking Regulatory Commission and China Insurance Regulatory Commission declared ICOs as illegal and ordered an immediate ban on related fundraising activities.

In July this year, the US Securities and Exchange Commission (SEC) also warned that some ICOs were being used to sidestep the law and should be regulated like other stocks.