After the scandal around the Terra ecosystem (LUNA) and its co-founder Do Kwon, South Korea took the initiative to introduce its first regulation of digital assets. Thus, these new laws will make it possible to regulate companies in the sector by defining the rules to be followed and the potential sanctions. However, this first regulation is perceived by some as insufficient.
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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 United Kingdom and the recent cases around the Securities and Exchange Commission (SEC), South Korea has taken the plunge by approving its first digital asset bill.
Adopted today by members of the Korean parliament, its main function is to protect investors after the carnage caused by the debacle of Terra (LUNA) in May 2022. As a reminder, this event caused the loss of more than 40 billion dollars in less than a week, triggered by the fall of the cryptocurrency LUNA and the stablecoin UST.
Named “Virtual Asset User Protection”, this new legislation contains 19 bills aimed at regulating the various players in the field on Korean territory. These explicitly list the penalties applicable in the event of financial fraud, such as market manipulation and unfair commercial practices.
Although this regulation was desired by the companies of the country, some industry figures reveal their disappointment. According to Lee Suh Ryoung, Chief General Secretary of the Association for the Promotion of Blockchain Enterprises in Korea (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 perspective of traditional finance in terms of cryptocurrency regulation. »
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South Korea and Terra (LUNA) – Where is the Do Kwon investigation?
The main motivator for the creation of regulation was the collapse of the ecosystem formerly co-founded and led by Do Kwon. At the head of Terraform Labs, he became in a few days the black sheep of the sector : While investors mourned their losses, mainstream media derided cryptocurrencies and their underlying technologies.
Fleeing from the authorities for many months, to the point of being placed on the Interpol red listhe will finally be captured in Montenegro in March 2023. Currently in detention for the possession of falsified identity papers, he must serve a short sentence there before being extradited.
At the same time, a tough fight 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 prisonthe nation’s largest conviction for a financial crime.
On the side of the United States, many lawsuits await him: while the SEC accuses him of misleading communication and marketing of unregistered financial securities, a group of prosecutors is suing him on 8 counts. The case remains to be followed.
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Source: Bloomberg
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Always enthusiastic about new technologies, I gradually moved closer to Web3-related activities during the year 2021. Over time, I wanted to add my stone to the building. It was then that I became an editor, with the aim of explaining cryptocurrency-related topics to as many people as possible.
Timothy Bourbotte
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