Authorities in South Korea are submitting additional revisions to the Digital Assets Bill in an effort to gain more control over cryptocurrency exchanges in the wake of the collapse of Terra LUNA and the bankruptcy of FTX.
To prevent situations like the FTX collapse from happening again, Congressman Yoon Chang-Hyun is drafting an amendment to increase the authority of financial authorities in their hands.
Chang-Hyun is reportedly recommending that the nation’s Financial Services Commission and Financial Supervisory Service be given more authority “in lieu of self-regulation” of crypto exchanges.
Customer deposits must now be kept separate under the new modification to the Digital Assets Act. Additionally, it grants financial regulators more control over unfair commercial activities. As a result, regulators will have the ability to monitor and check cryptocurrency projects and exchanges, safeguarding investors from multimillion-dollar losses like those driven on by Terra LUNA.
An important change to the Digital Assets Law is that, unlike FTX and Alameda Research, crypto trading platforms will no longer be able to abruptly seize their users’ deposits once they have been transferred to a custodian institution. The modification to the Act “was introduced to reflect on the FTX disaster and prevent a repeat,” according to an unnamed National Assembly official.
The new law further transfers control of such operations to financial regulators by eliminating the “self-regulatory” ability of cryptocurrency exchanges to take “appropriate measures” in the event of unusual variations in the price or trading volume.
Any unfair conduct will have to be reported by the exchanges to the Governor of the Financial Supervisory Service. The Governor will be in charge of taking the necessary precautions to stop money laundering, fraud, or any other crime.
A South Korean news outlet reported in August that the terms of the current Financial Investment Services and Capital Markets Act will apply to crypto assets that are classified as securities, while the new Digital Assets Framework Act (literal translation) will deal with matters relating to “non-security tokens.”
The Financial Services Commission, the key financial regulator, also launched a new crypto task force today with the intention of developing regulatory suggestions prior to the formation of the new act.
A number of hedge funds and exchanges became overexposed as a result of TerraUSD losing its U.S. dollar peg in May, with effects felt across the whole industry. A few South Korean Luna (LUNA) shareholders filed a complaint against Terraform Labs and co-founder Do Kwon in the same month, accusing them of scamming investors and breaking regional securities rules.