South Korea’s Financial Regulator Probes 157 Crypto Payment Providers after Terra Collapse
With the Terra (LUNA) disaster came many government regulations and investigations in many countries including South Korea. Many changes have been leveled on many erring firms, and legal actions are being taken against the South Korean cryptocurrency sector to reduce the possibility of reoccurrence.
The investigation, which began on 3rd June, involved the Financial Supervisory Service (FSS), a government financial regulator, requesting an economic overview of 157 crypto exchanges in which only 6 held any digital assets.
Further investigations showed that many wallets joined the Terra (LUNA) ecosystem after the crash in case of a rebound.
South Korean Crypto Regulations
There have been ongoing investigations into many South Korean Crypto exchanges following the fall of LUNA and its stablecoin UST. This probing is due to the belief that businesses didn’t prioritize investors’ protection against such a loss, thereby leading to an extended effect on the country’s other economic sectors.
South Korea’s Financial Intelligence Unit (FIU) insinuated that the effect of the crash on the domestic market was not pronounced. Still, it’d be essential to consider the impact of the virtual asset sector on the overall sentiment of the foreign and domestic financial market. They further stated the need for increased investor awareness of the market’s volatility and more emphasis on capital protection and investor accountability.
Due to the increased scrutiny, exchanges have strongly warned about assets with algorithmic stablecoin backing before any investment is made. It has also been suggested that contingency plans should be in put in place in the case of a rug pull, and updated assessment reports regarding virtual assets like whitepapers are provided to investors to understand the full functionality and utility of the investment before purchase.
The Korean Fair Trade Commission (FTC), an administrative body that regulates companies’ economic participation through implementing the Antimonopoly Act for consumer benefits, said it would investigate exchanges’ terms and conditions and their enforcement in the running of their affairs. FTC has previously put forward that 16 businesses such as Oceans, Coinone, and Upbit, among others, reevaluated their discriminatory terms and conditions last year.
On the 24th of May, The Financial Intelligence Unit (FIU) held a meeting at the National Assembly to enforce the creation of the “Enactment of the Basic Act on Digital Assets and Emergency Inspection of Coin Market Investor Protection Measures,” which launched on the 30th of the same month.
The meeting also had the CEO of the top Exchanges in attendance. In the event, Rep. Sung ll-jong, a political member of the People Power Party, asserted that exchanges be held accountable for misdemeanors to ensure the better function of the market.
We need to make exchanges play their proper role. To that end, watchdogs must supervise them thoroughly, and when exchanges violate rules, they should be held legally responsible for ensuring that the market functions well without any trouble.Rep. Sung ll-jong
Implications For the South Korean Digital Assets Sector
These regulations in the financial ecosystem seem to be a deterrent for new entrants and also an opportunity for the creation of standardized virtual assets. Whether this crackdown would also affect retail investors is not certain. Still, many other investors speculate that the crash was an excellent opportunity for governments to regulate cryptocurrencies while introducing their centralized digital currencies (CBDC).
Do Kwon, the founder of Terraforms Lab and creator of LUNA, has been charged by many investors that think that he was responsible for the collapse and was also fined for tax irregularities.