South Korea’s financial authorities have publicly expressed concerns about the collapse of the LUNA and UST tokens in the Terra ecosystem. As such, they have asked local exchanges to provide information regarding the volume of trading being done on these two cryptocurrencies. In addition, a member of the incumbent government wants Do Kwon to go through a parliamentary committee.
First legal fallout from Terra’s collapse
Following the impressive loss of value of the Terra blockchain tokens, LUNA and the UST stablecoin, a considerable number of individuals have been impacted, most of whom have lost significant amounts of money. The repercussions have also spread throughout the ecosystem, both in exchanges and in decentralized finance (DeFi) protocols.
The consequences are such that they now go beyond the cryptocurrency ecosystem alone. We have just learned that South Korean financial regulators, including the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) have decided to get involved.
Indeed, Do Kwon, the CEO and co-founder of Terraform Labs, Terra’s parent company, is a South Korean national, although Terraform Labs’ offices are based in Singapore.
Also, according to sources at various South Korean exchanges, the two regulatory bodies mentioned above have asked local cryptocurrency service providers to share information about their LUNA token and UST transactions.
The exchanges concerned were asked to share, among other things, the respective trading volumes of the two tokens, their closing prices and the number of investors involved in their drop. In addition, the authorities asked them to establish their own analysis of the situation, and if they had taken any countermeasures to limit the damage concerning investors.
More regulation to protect users?
According to an unnamed source working for one of the affected platforms, financial regulators are primarily interested in preventing a similar situation from happening again:
“Last week, the financial authorities asked for data on the amount of transactions and investors, and measured the concrete actions of exchanges. I think they did so to develop measures to minimize damage to investors in the future.”
According to Jeong Eun-bo, the head of the Financial Supervisory Service, the recent events could greatly impact the confidence of investors around the world towards the market as a whole. He adds that despite a lack of clear regulation regarding cryptocurrencies, the agency still needs to determine the ins and outs of Terra’s fall.
Finally, according to him, it is now essential that the regulatory authorities of all countries jointly study a suitable way to regulate the entire cryptocurrency market.
In the same media, a representative of a financial organization clarifies that the government can, for the time being, only act as an observer:
“Regarding the Luna incident, we are monitoring the overall developments, but there is no direct action the government can take at this time. There is no reason for the government to intervene because cryptocurrency transactions are operated freely by the private sector.”
Do Kwon soon before the commission?
Yun Chang-Hyun, a politician who is a member of the ruling government, the conservative People’s Power Party, has expressed his desire to hold a parliamentary hearing regarding the events blamed on Terra, and Do Kwon said:
“We should bring the relevant exchange officials, including Do Kwon, the CEO of Terra who has become a recent problem, to the National Assembly to hold a hearing on the cause of the situation and measures to protect investors.”
For all that, Do Kwon seems to want to try to straighten out the situation, the latter having proposed this Monday, May 16, to operate a hard fork of the Terra blockchain and create a new token LUNA.
An initiative far from unanimous, since to date, 90% of voters have chosen to respond negatively to the proposal of Do Kwon, the majority preferring in particular a burn of LUNA tokens in surplus.
