While the Korean government wavers between regulating and allowing ICOs, or initial coin offerings, various blockchain and cryptocurrency associations are selling fake ICO certifications, clouding the judgements of investors.
As of today, a total of 19 associations have emerged in the field of blockchain. Among them, the Korea Blockchain Industry Association (KBCIA, President Yun Samheum) is the most active when it comes to selling its ICO certification mark.
As of August 28th, D-Zone Coin (DZC) and MIR Coin (MIR) are the two tokens that have acquired ICO certifications from KBCIA. They received their marks on May 30th. The problem is that both of these coins are caught up in scam scandals.
◆ D-Zone Coin and MIR Coin – Scam or Not?
D-Zone Coin launched DreamNida, which offers TheDreamPay, “the first domestic blockchain based easy payment service.” DreamNida established a branch in Japan and ran an ICO for 28 days starting in June.
The token is currently listed on CoinExchange. Although the exchange is known to be a venue for several altcoins’ debut, some tokens listed on CoinExchange led to stirring up debate over their legitimacy.
D-Zone Coin is no exception. Considering that it is a project that has earned an ICO certification, its white paper was poorly written. It did not include any technical content including the mining method.
A local professor with blockchain expertise was asked to review the white paper. “This is just a simple payment coin with notably low fees. There are over dozen similar payment coins in Korea,” he said, adding “This type of token can be built on Ethereum in just 30 minutes.”
“This is a market that changes little by little given that a major financial company comes up with such token, followed by advertisement. It seems like a company, which does not have either the technology or solutions, is trying to enter an enormous market.”
MIR Coin also achieved ICO certification from KBCIA, but can hardly escape from similar fraud allegations.
MIR Coin started its ICO with a total volume of nine billion in April. Users can accumulate points by purchasing items in a blockchain based B2P ecosystem that leverages MIR Coin, and exchange those points to MIR Coin.
The project team aims to establish a circular ecosystem, where MIR Coins can be used in other stores that leverage MIR Coin’s platform.
Also, MIR Coin got listed on Coinis in June. It was supposed to get listed on BitForex on August 29th, but a MIR Coin representative said, “Due to internal circumstances of BitForex, the final confirmation (for the listing) is being delayed.” Detailed schedule was not disclosed.
◆ “Certification business has not been commissioned by the government” – Review process is also weak
Amidst the landscape, where the government has not legally acknowledged ICOs, much controversy surrounds the qualification of associations in which how they can issue certifications.
“This is a private certification system that has not been commissioned by the state, so it does not carry any significance,” said Park Sung-joon, the Head of the Blockchain Research Center at Dongguk University,
“If one wants to come up with an autonomous certification system, the standards should not be so abstract. It needs to be more detailed and specific. Also, the actual certification processes should be made public, so that people can know that the certification is made by experts,” Park said.
“Ultimately the association is an interest group gathered by interested parties, so it (the ICO certification business) lacks validity,” explained Lawmaker Chae Yi-bai, adding “If something goes wrong with such business, the government may have to step in. However, for now investors should take extra caution.”
Some point out that the ICO certification marks are being overissued to projects, which lack both the technology and a business case, due to poor review processes.
The ICO certification review process of KBCIA is largely made up of two parts. The first round of review involves checking the basic elements of the project, such as the authenticity of the documentation, the blockchain based product or the business site.
The second round of review is conducted by a comprehensive review committee, which involves assessing the technology and economic feasibility in detail. Technology assessment includes the following criteria: the proportion of technical value of the item, the completeness of the technology, the development potential, and the applicability to other items. Economic feasibility assessment includes the following criteria: the performance compared with the current industry, the production and price competitiveness, and the market size etc.
When asked “Could you share the review committee members?” by DailyToken, the Association replied “We cannot disclose the members due to concerns about solicitation. However, they are all capable reviewers.”
“The President (Yun Samheum) is also one of the review members. D-Zone Coin and MIR Coin, both certified by the Association, are highly regarded thanks to their established processes and business models,” added the Association.
◆ Final certification made by four associations? – A complicated structure involving the President
According to the Association, the institution that makes the final call for the ICO and blockchain certification is the World Blockchain Industry Association (WBCIA).
WBCIA operates under the condition “one country-one association,” and currently has four participating associations, namely: Korea Blockchain Industry Association (KBCIA), Japan Blockchain Industry Association (JBCIA), Estonia Blockchain Industry Association (EBCIA) and China Blockchain Industry Association (CBCIA).
However, information about the participating companies of WBCIA is virtually nonexistent. For instance, if you go to JBCIA’s homepage, and click on “Inquire” or “Join Membership,” you are redirected back to its homepage.
There is also no information about JBCIA’s business or membership registration status on the homepage. Moreover, the websites of CBCIA and EBCIA cannot even be found.
According to inforegister.ee, a credit rating company of enterprises operating in Estonia, EBCIA was established by President Yun, after he obtained e-Residency of Estonia.
The company rated EBCIA’s Reliability as 45%, due to EBCIA’s unclear business. What’s more is that the email address written down for EBCIA is the email address of TheDreamPay.
In short, all international associations and members related to the certification assessments are linked to KBCIA. President Yun Samheum is not only the CEO of DreamNida, D-Zone Coin’s Project, but also is the President of the Association that awarded DreamNida “The First Korea Blockchain Industry Prize.”
He is also the CEO of the Hoon Cyber Lifelong Education Center, which recently launched “Blockchain Development Expert” and “Blockchain Manager” courses. Including the aforesaid, Mr. Yun currently acts as the head of 8 out of 20 association member companies.
It only costs KRW 5m to apply to the Association for an ICO certification. According to the Association, you can get a 20% discount if you pay using TheDreamPay.
In short, it only costs a mere KRW 5m, and can even get discounts, to become a certified ICO, which can raise from billions of wons to tens of billions of wons. It is ultimately the investors who bear the brunt of such poor certification.
Translated by Cha Soo-jin