As a direct reaction to the failure of the FTX cryptocurrency exchange and the implosion of Terra ecosystem coins in May, financial officials in South Korea intend to impose a slew of new rules linked to cryptocurrencies. These laws would be in the form of new regulations.
With the exception of Gopax, which has allowed consumers access to defi services in cooperation with a Digital Currency Group-affiliated firm, the majority of South Korean cryptocurrency exchanges have been left largely untouched by the repercussions from FTX thus far.
However, legislators had already begun to advocate for further rules before the collapse of the Terra currencies market and the subsequent inability to locate and apprehend the missing co-founder of Terraform Labs, Do Kwon. Since the collapse of FTX, authorities have been more insistent on the need of reform. In addition, the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) are looking at ways to expedite the work they have been doing on this front.
More Crypto Regulations Incoming in South Korea
- Regulators want to establish a system whereby customer deposits are kept separately from exchanges’ own assets. Current guidelines already dictate that this should be the case, and exchanges have been asked to self-regulate accordingly. But the new proposals would effectively enshrine these guidelines into law – and give the FSC and other regulators the power to inspect and “supervise” exchanges’ handling of their clients’ assets.
- They are also backing an MP’s proposal that would stop crypto exchanges suspending customers’ deposits and withdrawals “without good cause.” The bill proposes granting financial regulators the power of veto over any exchange’s decision to withhold a withdrawal request. It also proposes hitting non-compliant exchanges with fines of up to $74,000.
- Regulators have also carried out a probe into crypto exchange-created tokens. While no major domestic crypto exchanges have issued their own coins, they are concerned that this may not be the case among smaller exchanges who may have issued coins as recently as 2020. They want to look at the way exchanges list other exchange-issued coins – and want to avoid a repeat of the FTT token fallout.
Furthermore, regulator-led probes have also found that domestic crypto exchanges have some degree of exposure to the FTX collapse via the FTT token, finding that platforms hold or have held some “$1.5 million” worth of FTT.
Compiled by Coinbold