Following the scandal surrounding the Terra (LUNA) ecosystem and its co-founder Do Kwon, South Korea has taken the initiative to introduce its first regulation of digital assets. These new laws will regulate companies in the sector, defining the rules to be followed and potential sanctions. However, this first regulation is seen by some as insufficient.
South Korea regulates the cryptocurrency industry
Is 2023 the year of regulation for the cryptocurrency industry? After the MiCA and TFR texts adopted by the European Union, the bills under discussion in the UK and the recent cases surrounding the Securities and Exchange Commission (SEC), South Korea has taken the plunge by approving its first draft law on digital assets.
Passed today by members of the Korean parliament, its main function is to protect investors after the devastation caused by the Terra (LUNA) debacle in May 2022. As a reminder, this event caused the loss of over $40 billion in less than a week, triggered by the collapse of the cryptocurrency LUNA and the stablecoin UST.
Named « Protection for users of virtual assets », this new legislation contains 19 bills aimed at regulating the various players in the field in Korea. The bills explicitly list penalties for financial fraud, such as market manipulation and unfair trading practices.
Although this regulation was desired by the country’s companies, some industry figures revealed their disappointment. According to Lee Suh Ryoung, chief secretary general of the Korea Blockchain Enterprise Promotion Association (KBEPA), these laws are insufficient to provide a specific regulatory framework for players in the field :
» We welcome the authorities’ attempt to restore order […] but the law in general remains stuck in the traditional finance perspective in terms of regulating cryptocurrencies. «
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South Korea and Terra (LUNA) – What’s the status of the Do Kwon investigation?
The main motivating vector for the creation of regulation was the collapse of the ecosystem formerly co-founded and led by Do Kwon. Head of Terraform Labs, in a matter of days he became the black sheep of the industry : while investors mourned their losses, the mainstream media derided cryptocurrencies and their underlying technologies.
Fleeing the authorities for many months, to the point of being placed on Interpol’s red listHe was finally captured in Montenegro in March 2023. Currently in detention for possession of falsified identity papers, he is due to serve a short sentence there before being extradited.
At the same time, a tough battle is waged between the United States and South Korea to obtain Do Kwon’s extradition. If he is sent to his native country, he could be sentenced to 40 years in prison.the highest sentence in the country for a financial crime.
In the U.S., numerous trials await him: while the SEC accuses him of misleading communication and marketing unregistered financial securities, a group of prosecutors is pursuing him on 8 counts. The case remains to be seen.
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Source: Bloomberg
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A lifelong enthusiast for new technologies, I gradually became involved in Web3 activities in the year 2021. As time went by, I wanted to do my bit. That’s when I became a writer, with a view to explaining cryptocurrency-related topics to as many people as possible.
Timothy Bourbotte
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