The South Korean government and financial regulators appear keen to ensure that May’s Terra ecosystem crash – an event they have dubbed the “terra/LUNA incident” – will become a watershed moment for the crypto sector, with a slew of new regulations incoming. The new head of a leading regulatory body led those vowing to implement changes, calling for the creation of a system that provides investors with more “fairness.”
Chief among the new regulations will be the imminent launch of a new government-appointed regulatory body that will be charged with policing the crypto sector. As reported, this body has been tentatively named Digital Assets Committee (literal English translation), and could launch in the next two weeks.
The body will – unlike most other financial regulators that also deal with traditional finance-related issues – be devoted entirely to the policing of the crypto market. It will also be charged with forming policy for the industry.
Also debuting in the coming weeks or months will be a joint council comprising the five largest crypto exchanges in the country: Upbit, Bithumb, Coinone, Korbit, and Gopax. This council will be charged with making coordinated token listing and delisting decisions, and, the Donga A Ilbo reported, is now working on a set of industry-wide standards.
On Monday, the government and the ruling People’s Power Party held a meeting at the National Assembly on the topic of post-“terra/LUNA incident” crypto policy, per the Segye Ilbo. The parties said their aim was to “restore fairness in the virtual asset market” and “protect investors.”
Also in attendance was the newly appointed head of the Financial Supervisory Service (FSS) Lee Bok-hyeon, who has already vowed to make crypto regulation one of his chief priorities.
Lee, who took office on June 7, was quoted as stating:
“We will closely review the impact of the spread of virtual currency on the stability of the financial system and on the protection of consumers. We will also seek to plug gap in investor protection until a public regulatory system has been established.”
However, Lee also echoed sentiments expressed by the ruling party, claiming that while regulators and politicians needed to help create a “reasonable regulatory system,” the industry needed to be given the power to “self-regulate.” The FSS chief called for the “active participation of private sector experts,” claiming that the industry’s role in regulation needed to be “emphasized.”
The five exchanges claimed that they would not allow a “repeat” of the “confusion among investors” that occurred in the wake of the crash, when each platform took its own decision to delist the LUNAC (formerly LUNA) token at different times – leading to market chaos.
Meanwhile, the People’s Power Party also expressed its intention to speed up the rollout of new legislation. Seong Il-jong, the party’s policy committee chairman, was quoted as stating that the party was now working on the “Blockchain Basic Act” (literal translation) in a bid to “support the Industry 4.0 era.”
The FSS chief and other officials at the meeting also confirmed that the Financial Services Commission (FSC)’s own probe into the LUNAC issuer Terraform Labs and the crash itself was still ongoing.
Prosecutors are also conducting their own investigation.
Much may hinge on whether financial regulators can establish whether they could consider LUNA to be a security. Under existing South Korean law, securities can be regulated under the terms of the Capital Markets Act, the Chosun Ilbo reported. Tokens that are not classified as securities cannot be policed by either the FSC or the FSS.
Lee stated that he would “look into” the matter.
He also pledged to boost “fairness” in the crypto ecosystem, stating:
“In cryptoasset trading, large-scale and [anonymous] transactions can cause information asymmetry and unfair trading. Steps need to be taken [to address this].”
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