With the collapse of Terra’s LUNA and UST stablecoin sending shockwaves across the global virtual currency market, Korean financial authorities have vowed to fast-track regulations aimed at protecting consumers from such risks.
According to a Sunday report by a local publication-YNA, Korean authorities plan on enacting the “Basic Act on Digital Assets” by 2023 before implementing it in 2024. The “emergency decision” was reportedly arrived at by the Financial Supervisory Service and the Financial Services Commission, the departments in charge of virtual assets after the Luna incident.
“We are monitoring the overall situation and checking trends in relation to the Luna incident, but there is no means for the government to respond immediately, “an official from the government said. However, he added that they had “the authority to supervise the anti-money laundering of coin transactions, but there is no basis for intervention in this price crash.”
Terraform Labs, the firm behind Luna and UST was co-founded by Do Kwon, a South Korean software developer who has now become the face of the turmoil that unfolded on the Terra blockchain. By extension, UST and Luna as also classified as “Korean coins” the more reason South Korea has shown a lot of interest in the crash.
As per the report, local exchanges had also expressed concerns that the failure of Luna and UST could be interpreted as the overall failure of the global crypto market. As such, they had expressed their support for the enactment of the aforementioned act after realizing that local authorities had no authority to intervene in the Luna incident.
“In the event of such a risky situation, we need to reduce confusion among investors by creating a legal provision that allows all domestic exchanges to simultaneously notify all exchanges of trading caution.” A local crypto exchange insider said.
The act, among other issues, is aimed at giving financial authorities in Korea powers just like those that are exercised on other securities when dealing with digital assets. Korea is also considering launching a central bank digital currency (CBDC) as it seeks to institutionalize digital assets.
Last week, the global cryptocurrency market plummeted after UST fell below $1 with Luna, its sister coin also dropping to zero. Luna Foundation Guard, official stewards of Terra’s bitcoin reserves, announced Monday that it would compensate LUNA and UST to affected investors.