South Korean government pushes for a faster approach to crypto regulation amid LUNA token crisis

In this post:

  • The LUNA fiasco has led to an acceleration in the adoption of cryptocurrency rules in South Korea, according to local news sources.
  • The “Digital Asset Basic Act,” which will become law in Korea in 2023 and take effect by 2024, is intended to regulate cryptocurrencies.
  • Creator of Korean-made cryptocurrency LUNA is under attack siege after losing $37 billion in value.

South Korean financial authorities have launched an emergency study of cryptocurrencies, which is designed to help them pass the “Digital Asset Basic Act,” the country’s upcoming cryptocurrency regulation.

LUNA crisis hastens Korea’s pace in regulating cryptocurrency

The digital asset class is currently not regulated in South Korea, but the government has been working on a legal framework for some time. The “Digital Asset Basic Act” was first proposed in March of this year, and it is intended to be a comprehensive set of rules governing cryptocurrencies.

The LUNA incident has brought the issue of regulation to the forefront, and it is now a top priority for the government. The ill-fated coins, managed by Terraform Labs, plummeted in value to almost US$0 before they were halted and an uninvited visit was made to the CEO’s home.

This new legislation is designed to allow for more rapid development of a “Digital Asset Basic Act,” which is expected to take effect by 2024. It is anticipated to contain 30 percent tax regulations for digital assets and insurance for customers.

According to reports, the legislation will focus on safeguarding investors and local media, and it will be announced shortly after being finalized. In the meantime, Terraform Labs has stated that they will fully cooperate with any investigations.

It is still unclear exactly how the new regulation will impact cryptocurrency exchanges in Korea, but it is expected that there will be some changes. The government is still working on the details, but it is clear that they are taking a more active role in the development of the crypto industry.

Yoon Suk-yeol, the president-elect of South Korea, has prepared a list of national goals that include cryptocurrency regulations. The bill proposed by the South Korean government didn’t set up a digital assets agency, which has frustrated fintech organizations in the country.

Following the LUNA disaster, Korean officials said that the Financial Services Commission (FSC) and Financial Supervisory Service (FSS), the country’s two regulatory bodies for digital assets, will most likely raise investor awareness.

The LUNA incident has brought the need for regulation to the forefront, and the Korean government is now taking steps to address it. This is a positive development, as it shows that they are willing to work with the industry to ensure its future growth.

The government of South Korea presently lacks the legal authority to directly inspect or regulate the Terra platform because existing legislation is only concerned with anti-money laundering issues.

LUNA creator under siege for mass loss of $37 billion

Four years ago, when Do Kwon’s firm Terraform Labs created the cryptocurrencies UST and luna with the aim of establishing a decentralized economy, he was a rising star in the worldwide digital asset market. His popularity reached its peak when luna rose to over $119 early last month, making it the first Korean-developed crypto to appear in the top 10 cryptocurrencies with the greatest market capitalization in the world. The price of UST fell from around $0.18 to a low of $0.11, with the pair being frozen by Binance, which announced that the order book for LUNA and UST appeared to be closed, with no trades being processed.

Following the collapse of LUNA, the 30-year-veteran computer engineer-turned-chief executive has found himself under attack by enraged investors and market regulators. Over the course of a week, more than $37 billion (47 trillion won) vanished from the market caps of two Korean-made cryptocurrencies – terraUSD, also known as UST, and its sister token luna – leaving investors wondering if the losses will ever be recouped.

On Monday, the National Police Agency of South Korea revealed that it is keeping a watch on LUNATIC, but has no immediate intention to investigate Terraform Labs. When asked about the CEO being sued overseas, police representatives said no civil charges have been filed against Do Kwon.

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