More regulatory scrutiny could be incoming for the crypto sector in South Korea in the wake of the terra (LUNA) and terraUSD (UST) crash – with exchanges set to come under the same kind of scrutiny as Terraform Labs and its Founder and CEO Do Kwon.
KBS reported that the People’s Power Party – the second-largest party in parliament and the party of President Yoon Suk-yeol – and the government held a joint “Emergency Inspection Meeting for Virtual Assets” at the National Assembly on May 24.
The meeting concluded with the announcement that the government would look to revise existing crypto regulations – and will likely focus on policing the way that exchanges list and delist coins.
At present, listing policies are formulated at the discretion of exchanges. The situation is quite different across the sea to the East in Japan, where token listing applications must be approved by a self-regulating body.
Exchanges also sparked controversy in South Korea last year, when a spate of late-night delistings left some investors fuming.
But the Terra collapse appears to have become a galvanizing incident in South Korea – and even the crypto-keen presidency looks bound to act on it.
Seong Il-jong, the Chairman of the People’s Power Party’s Policy Committee, was quoted as stating that “since the crypto sector” is a “new business,” there “may be situations whereby” certain “laws are not in place.”
Seong added that the government had launched a review of “whether we can regulate any disturbances” to the crypto market or “other problems” in the space.
And this review could lead to changes that come sooner, rather than later. Yoon has previously spoken of creating a new pro-crypto law that will give crypto firms business rights and further facilitate growth in the sector. But the meeting attendees agreed that while such a bill would take time to formulate and then pass through the National Assembly, further regulations could be passed much faster – and would take the form of amendments to the existing Specific Financial Transaction Information Act.
Another committee chief was quoted as stating that the aforementioned act had been created “with the purpose of preventing money laundering,” the government was “aware to a large extent that the [law] has limitations when it comes to regulating or controlling exchanges.”
“I think the situation has changed […since] the [LUNA/UST] crash.”
Meanwhile, a leading academic calls for more crypto regulation in a government-organized seminar on the crash – claiming that so great is the size of the domestic crypto market that a single exchange going bankrupt could cause shockwaves that could impact the entire national economy.
Business Post quoted Jeon In-tae, a professor in the Department of Mathematics at The Catholic University of Korea, as stating that the level of “consumer risk for cryptoassets traded in large quantities on exchanges” was “increasing.”
“If an exchange goes bankrupt, [that would be a problem]. Exchanges have grown to such an extent that it means that such an event would shake the South Korean economy. As such, more fundamental countermeasures against such operational risks are necessary. Adequate regulation helps to promote the industry by making the market transparent and reducing a variety of risks.”
Jeon also opined that Terra “algorithms” “raised questions” from “the point of view of investor protection.”
Another academic, Hwang Seok-jin, from Dongguk University’s Graduate School of International Information Security, said that LUNA and other Terraform coins had “no collateral and had been “created through arbitrage and market inducement strategies.”
Hwang argued that it now is necessary to create a “transparent listing and delisting system.”
He claimed that “rather than holding countermeasure meetings after a specific issue occurs, such as the LUNA incident, it is necessary to establish a dedicated body that will prevent and preemptively respond to such situations.”