IEO (Initial Exchange Offering) Guideline
IEO (Initial Exchange Offering) Guideline
  • Korea IT Times
  • 승인 2018.11.09 11:51
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IEO (Initial Exchange Offering) Guidelines / 2018.11

1. Introduction

Korea University's Cryptographic Exchange Research Institute, Korea Block Chain Industry Promotion Association, and the Korea Blockchain Startup Association have offered the following Initial Exchange Offering (IEO) guideline. 

The above three agencies have formulated this guideline in response to ICO, which has existed for almost two years without any uniform standards. Although there have been some positive effects of some Angel investments, it has, for the most part, contributed to excessively risky and fraudulent activities, that have clearly negatively impacted the development of the blockchain industry. 
As a first step toward creating a well-regulated trade culture for cryptographic assets, the advice of the National Assembly, the government, and academia, as well as future market participants should be taken into consideration. A revised guideline that reflects advice from these groups will be given henceforth in early 2019.

2. Definition of IEO

IEO is a method of financing a business through a token sale, right before it is listed on the exchange of cryptographic assets and requires the following features and conditions. First, there is a need to create a prototype that has minimum functionality called MVP (Minimum Visible Product), with enough features to satisfy early customers and to demonstrate to the token buyer the ability of the project team to develop the project. In addition to the preparation of a ‘white paper’, which refers to the project plan, the white paper, and its website should self-regulate with the IEO Guideline on its homepage for public viewing. Reliability would be increased with the inclusion of a ‘yellow paper’, documenting the retention technology and progress of development. 

IPO is the act of collecting the necessary funds from the public sale of stocks right before the IPO is listed; IEO is the act of selling tokens at a public sale right before they are listed to secure the necessary funds. Accordingly, this guideline has applied the IPO standards of the established stock market. 

The following is a list of the differences between IPOs listing shares and IEOs that list tokens.

                                               IPO vs. IEO




Internal funding  

Establishment of business, initial funding method

Internal funding  

Angel Investor VC buyer, VCs

Additional funding methods for lack of development funds

Angel Token 

IPO Subscription

Raise funds for business enlargement
 Global expansion funds (Raise funds through public offering before listing exchange)

IEO Token Sale

Review Board

Listing review process

IEO Guideline

 Stock market


funds    Listed company

Exchange listing

Rights offering

Additional procurement 

Holding coins/pc

Note 1)
We also reviewed ways of raising funds through token sales after being listed directly on the exchange, but we determined this to be undesirable for a number of reasons. From the perspective of the exchange, there is a high risk that this will discourage new investors from entering the exchange, with excessive fees or arbitrarily listing tokens that have a special relationship with the exchange. For these reasons, this method is not recommended. The most significant difference between the IEO and the existing ICO, then, is that the ICO shows only the white paper; for fundraising, IEO would have to essentially demonstrate technology and business through the development of MVPs and then raise the funds through token sales. Numerous disclosure systems such as those included in stock trading should be introduced and maintained to protect token buyers. 

3. IEO Guidelines: Purpose, Applications, and Limitations 

1) Purpose
Since the existing ICO method is insufficient to protect token buyers due to lack of uniform standards, this guideline attempts to provide guidance in token transactions through cryptographic assets that were previously arbitrarily conducted, to reflect as much as possible the legally-based existing financial investment market practices and regulations.
Organizers, corporations, and organizations that want to collect block-chain business funds can develop and demonstrate the MVP (Minimum Visible Product) that operates normally when the business model is dApp, so those token buyers can easily review their technology and business models. In the case of Main-Net, 'Proof of Concept' is implemented, the source code is made public, and 'normal operation' is considered to be MVP. Market participants such as organizers are also responsible for identifying, evaluating and observing other obligations related to domestic and international regulations.

2) Application method
The guideline consists of two levels, which are given level-specific certifications, and sets a token sales recommendation limit for each level; and provides a checklist of all of the items, including legal and technical checklists. Participants can check the scores for each item and obtain/use the certification corresponding to the score by level, but the self-check content must be disclosed. If any facts are found to be inconsistent with the check, the token buyer may initiate legal proceedings and it may be the basis for the seller to being expelled from the exchanges. Therefore all of the facts should be checked and disclosed on the white paper and homepage so that the project can be validated by any member of the public.

3) Limitations
These guidelines may present different regulations than current guidelines in the legislative process of the Republic of Korea for current blockchain and cryptographic assets, and there may be parts of a new business model or project that are not in line with these guidelines.
In addition, stock-type tokens are excluded from this guideline.

4. Introduction and operation of a public disclosure system

All operators that comply with the IEO Guidelines should introduce and operate a disclosure system that includes:
a) Token sales information, lockup quantity and terms of termination, IEO Soft Cap & Hard Cap, etc.
b) The project team (company), all the contents affecting the operation of the team such as shareholder's status, financial structure,
c) Any information that may affect the token price, including major contracts and termination

5)Token Sales, Recommended Limit Per Level



Token Sale recommended a limit 


Level 1

700 points or more 

Over 1.5 billion


Level 2

700 points or less

Less than 1.5 billion


Applicants who comply with these guidelines can self-evaluate the project and give themselves level certification corresponding to the evaluation score.

6) Future management plan and processing of inquiries
1) This guideline will be upgraded on a quarterly basis over the next year, based on users' feedback; it will be upgraded regularly to reflect real-time needs.
2) The contents of the upgrade will be posted on the websites of the three organizations. Any inquiries related to these guidelines will be received by the Korea Block-chain Start-up Association and will be answered after consultation of the three organizations.
3) Inquiries are received at the following e-mail address, and the handling of inquiries by domestic companies is handled free of charge, but other inquiries are subject to a pre-determined fee.

7. AML and the establishment of ‘The public anti-threat fund Act'

The purpose of the Anti-Money Laundering Act (AML) and the Anti-threat Fund Act is to protect the financial system from money laundering and terrorism financing. The token sale process through IEO ensures that all participants of this guideline are responsible for identifying the token purchaser and for preventing the inflow of illegal funds through AML.

8. Classification of tokens and other definitions of terms

The classification and definition of tokens used in this guideline are consistent with the classification and definition of ICO guidelines issued by the Swiss FINMA and Singapore MAS. 

9. List of IEO Guideline Committee Members

Kim Hyoung-joong (Professor, Korea University / Director, Cryptography Currency Research Center, Korea University)
Kim Hyung-Ju (Chairman / President, Korea Block Chain Industry Promotion Association)
Shin Geun-young (Chairman / Head of Korea Block-chain Start-up Association)
Koo Tae-eon(Lawyer/CEO of TEK & LAW)
Jung Seung-chae (CSO / Block Chain Factory)
Lim Myeong-soo (Vice Chairman / Vice Chairman, Korea Block Chain Start-up Association)
Shin Yun-kwan (Secretary General / Korea Block Chain Industry Promotion Association)
Han In-soo (Partner / Iolos Partners)
Kim Tae-bong (CEO / Shieldcure)
Kwon Soo-ho (Director of Education Center / Korea Block Chain Industry Promotion Association)
Han Seo-hee (lawyer / Barun Law Firm

Reference: minimum information requirements related to IEO guidelines questions
1.  General Information
1) Project name
2) Company name/company address, email address and homepage, project organizer
   Name (individual or Group)
3) Details of participants (including address, the residence of the company)
         - Founder
         - Token publishers and sellers
         - Other secondary trading participants (platform, IEO organizer, etc.)

4) For foreigners: In accordance with applicable law, the above-mentioned participants
   Have you received proper permission? If allowed, provide details
         -Project description
         -project name, purpose, project plan
         -key features of the services to be provided

5) Which market participants (token buyers) are targeted by the IEO?
6) Are there any restrictions on token buyers?
7) Items related to the project organizer and the project plan (IEO schedule, history, etc.)
8) Information on the technology used (distributed technology to be used; new and existing technologies to be used; open source projects, etc.)
9) Which cryptographic assets (encryption currency) or legal currency are funded by IEOs?
10) What is the funding scale of IEO? (in KRW)
11) Has the fund been allocated to a specific project?
12) How will surplus funds be handled?
13) Token-related matters
         - What procedures will result in a token being created?
(Technical criteria, e.g. ERC20, the technology used, etc.)
         - When, by whom, and in what ways are tokens moved to token buyers?
         - What features will be included in the token? (Detailed)
         - At what point will these functions be applied?

14) Movement and Secondary Market
-How are tokens moved? (Compatible wallet, information on technical standards)
-Is the token already functioning as a somewhat of white paper at the time of the move?
     What are the levels of expectations?
-After publication, how and when can the tokens be acquired and sold?
(Is there a secondary market platform?)
- Can a token be used to buy goods or services or to pay the third party?
-Does the project operator/Publisher plan to repurchase tokens?

2. IEO Guideline Checklist

IEO Guideline Self Checklist v1.0 KUCL,KBIPA,KBSA
No           FieldChecklist Score


 Buyer protection

Are the basic items disclosed?   15

Announced publicly to management and key stakeholders? 
Is there an advance notice on screening information items and differential offerings?  10
Are there any restrictions on transactions using internal information? 10
Is the general purchaser regularly notified?   10
Is there regular notification of the public other than the purchaser?  10
Are there internal devices and systems that take price stabilization measures? 15
Are there internal devices and systems that take price stabilization measures? 15
Subtotal 100


Feasibility   review

Is the business a model that was being serviced by an existing Web or App?  20
Can you eventually evolve into a decentralized model?  20
Did you get an investment from an institutional buyer (V.C. or Crypto Fund)?  10
Does your business have included more than 10% experienced career manpower of your total workforce?  10
 Is there a CFO and internal control system?  15
Do you have experience in business-related development of participating developers?  10
Are you audited by an external accounting firm?  20
Do you have relevant business development experience in the participating developer's career?  10
Are you being assisted by an agency contractor for a token sale?  20(-20)
Is there a partner company or marketing specialist in your company to expand your business?  15
Subtotal 150(130)



Performance 75
Verification Transparency  75
Development capacity 75
MVP Presence 200  200(-300)
Ethics  75
Subtotal  500(0)



Is the company's governance structure and the composition of the project participants appropriate?  15
Do you have adequate internal controls?  40
Do you disclose the anti-money laundering/user protection policy?  40
Do you have jurisdictional compliance controls? 30
Do you have customer protection procedures?  25
Subtotal 150



Are Vulnerability checks and countermeasures in place?  22
Have you acquired accredited certification and enhanced certification? 12
Have appropriate system security policies and solutions been secured?  33
Have you prepared privacy policies and countermeasures? 6
Are security staff designated for security activities?  6
Are security management and monitoring activities normalized?  6
Are disaster response procedures (manuals) and countermeasures secured? 9
Do you have a dedicated security budget for your entire IT project budget?  6
Subtotal  100
    Grand Total 1,000 1000



Korea University's Cryptocurrency Research Center/
Korea IT Times/

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