In response to Terra’s dramatic collapse, two South Korean financial agencies have launched emergency inspections into local crypto trading platforms. A South Korean parliament member has also reportedly requested a parliamentary hearing on the incident, requesting that local exchange executives and Terraform Labs CEO Do Kwon testify.
South Korea Launches Terra Probes
According to Yonhap, a local media outlet, South Korea’s Financial Services Commission and Financial Supervisory Service reportedly initiated “emergency” inspections of local cryptocurrency exchanges in an effort to enhance investor protections following Terra’s collapse. The two regulatory bodies requested that local crypto exchanges disclose data regarding UST and LUNA transactions, including trading volume, price fluctuations, and the number of affected investors.
“Last week, financial authorities asked for data on the number of transactions and investors, and sized up the exchanges’ relevant measures,” a local exchange official reportedly told Yonhap. “I think they did it to draw up measures to minimize the damage to investors in the future.” They also noted that the agencies had asked the exchanges to conduct a detailed analysis and outline their countermeasures to the incident.
The Terra blockchain, which is currently hosting the UST “stablecoin” and native governance token LUNA, was developed by Terraform Labs, a Singapore-based company led and co-founded by Do Kwon. Around May 8, its stablecoin UST began de-pegging from its target parity with the dollar. Despite Terraform Labs and the Luna Foundation Guard’s attempt to remedy the situation with their Bitcoin reserve fund, LUNA and the UST continued to fall further over the next days, wiping roughly $40 billion in a week.
Billions of dollars were wiped from the global crypto market, with several reports circulating about investors committing suicide after the incident. According to Yonhap, over 200,000 South Koreans are believed to have invested in UST and LUNA, explaining the local authorities’ sudden interest in the matter.
Another local outlet, Newspim, reported Tuesday that South Korean parliament member Yun Chang-Hyun has also called for a hearing on Terra, requesting that local crypto exchange officials and Kwon be brought forth as witnesses. “We should bring related exchange officials, including CEO Do Kwon of Terra, which has become a recent problem, to the National Assembly to hold a hearing on the cause of the situation and measures to protect investors,” he reportedly said during a plenary meeting of the National Assembly’s Political Affairs Committee.
Chang-Hyun also questioned the local exchanges’ conduct during Terra’s downfall, suggesting that high trading volumes may have incentivized exchanges to keep trading open in stead of shutting it down. “As there is a saying, ‘Even if the coin price falls, the exchange gets fees.’ Upbit, which was the last to stop trading even after seeing the crash, is the number one company with an 80% share. In just those three days, it earned close to 10 billion won [$7.8 million] in commission income,” he claimed.
Despite the seriousness of the situation, local police said that as of Monday, no civil complaints had been filed against Kwon or Terraform Labs, indicating that authorities have not yet initiated a criminal probe.
At press time, UST is trading at around $0.087, while LUNA has virtually plummeted to zero. An ecosystem revival seems pretty far-fetched right now. Not to mention, as investors are losing confidence in Terra, they have unanimously rejected Kwon’s proposal to fork the Terra blockchain and launch a new token.
