South Korean Crypto Exchanges Under New Microscope Following UST Collapse

With hundreds of thousands of dollars lost as a result of the Terra stablecoin collapse and consecutive Luna token, the South Korean financial authorities are arranging to increase the oversight of its local crypto exchanges and introduce new laws to protect the industry, The Korea Times reported Tuesday.

"We need to make exchanges play their proper role, and toward that end, it is crucial for watchdogs to supervise them thoroughly," Rep. Sung Il-jong of the ruling People Power Party said during a National Assembly emergency meeting. "When exchanges violate rules, they should be held legally responsible to ensure that the market functions well without any troubles."

Financial Services Commission Vice Chairman Kim So-young and other government officials attended a two-day-long meeting in regards to the topic, with representatives from Upbit, Bithumb, Coinone, Korbit, and Gopax, all local crypto exchanges attending.

"We are going to build close ties with the Ministry of Justice, the prosecution and police, in a bid to monitor any illegal acts in the industry and protect investors' rights," Kim said during the meeting.

After de-pegging from the U.S dollar, Terra’s algorithmic UST stablecoin, collapsed earlier this month leaving the industry flailing and many investors sad with losses. A reported 280,000 Korean investors were among the victims of this catastrophic crash.

South Korea's ruling party member and chairman of the parliament's special virtual assets committee Yoon Chang-Hyeon probed the local crypto exchange's response to the events after the fall of Terra. Suggesting that it was in their favor to keep trading of the asset open due to high transaction fees and volume, despite the clear customer risk, per a report from the local outlet Newspim.

Just last week the South Korean Financial Services Commission (FSC) made a joint initiative with the Financial Supervisory Service, to do widespread emergency inspections of local exchanges, especially asking for data regarding transactions and investors.

This is just the start as it pertains to legal action in response to the collapse of Terra, South Korea seems quick in its action to protect its citizens and industry, maybe this can be a blueprint as to how major nations should respond to such a new financial problem, one sadly marred to happen again.