Terra crumble expedites Korea's push for digital asset exchange and legislations on crypto

Choi Geun-do, Kim Hye-soon, Park Dong-min and Cho Jeehyun 2022. 5. 18. 13:36
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[Photo by Lee Chung-woo]
South Korean financial authorities are expediting the launch of the country’s first public-backed digital asset exchange in Busan and push for legislations on digital assets to bring them into the legal framework for investor protection after panic from the downfall of Terra assets invented by a Korean national.

Koh Seung-beom, chairman of Financial Services Commission (FSC), stressed the urgency of implementing the appropriate laws for digital asset investment at the National Assembly’s state affairs committee meeting on Tuesday.

“It is difficult to come up with adequate measures amid absence of basic laws that regulate crypto assets,” Koh said.

As many as 541 coins have disappeared from private exchanges in Korea since 2017. Money lost from their removal was estimated at 1 trillion won ($787 million), according to a study by Rep. Yun Chang-hyun of People Power Party.

The latest turmoil from stablecoins TerraUST and Luna further highlighted the danger in crypto investment.

Market experts warn that Terra-like blow could be repeated any time, given the poor regulatory system in Korea.

The decision to list and delist coins is solely up to crypto exchangers and their review of the coin issuers’ white papers, which describe the coin’s algorithm, issue plan and other key information. But the white papers often lack details and are revised frequently, making the standard for coin listing ambiguous.

Crypto exchanges have pulled out coins without sufficient notice to investors. Right before the revised and stricter financial transaction law took effect in September last year, Korea’s major crypto exchange Upbit removed 32 coins on June 18 and gave just one week of notice to investors.

The sudden delisting of digital coins caused wild swing in prices, with some making heavy drops while others showing abnormal jump due to speculative trading activities.

There are 13 pending bills related to digital asset at the National Assembly with some proposing entirely new laws for digital asset industry and others to revise existing capital and electronic financial transaction laws to cover digital assets.

The Public Procurement Service is receiving opinions on the idea of creating a digital asset exchange in Busan until May 30. The southern coastal city government overseeing second largest population in Korea hopes to get the exchange ready for operation by the end of next year.

The exchange envisions trade of security tokens and non-fungible tokens with proof of ownership, as well as institutionalization of evaluation, supervisory, and guarantee systems.

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