South Korean lawmakers have proposed amending the Digital Assets Law to tighten controls on cryptocurrency exchanges to prevent situations like FTX and Terra.
Republican Yoon Chang-Hyun of the Power of the People party believes that it is necessary to expand the powers of the South Korean Financial Services Commission (FSC) and the South Korean Financial Supervisory Service (FSS) so that departments can monitor and audit the activities of cryptocurrency platforms. If the new amendments are adopted, trading floors will not be able to randomly use the funds of their clients, as happened with the FTX exchange and Alameda Research.
Cryptocurrency exchanges will also be prohibited from taking any action in the event of market fluctuations or changes in trading volume. Control over this activity will be transferred to the financial authorities. In addition, exchanges will be required to immediately report any fraudulent activity to the FSS Manager, who will take appropriate measures to prevent fraud, money laundering or other crimes related to cryptocurrencies.
Chang-Hyun believes that the proposed amendments will allow financial authorities to tighten control over the trading of crypto assets and reduce the number of fraudulent transactions in the market. This will protect investors from losses by preventing incidents like the crash of FTX and Terra from happening again.
Recall that the South Korean prosecutor’s office, together with Interpol, is still looking for the co-founder of the Terra ecosystem, Do Kwon. In October, South Korean authorities stripped him of his passport over allegations of fraud. Recently, another co-founder of Terraform Labs was involved in the investigation, which could contribute to the collapse of the project.
Last week, the South Korean Financial Intelligence Unit (KoFIU) began investigating the placement of local cryptocurrency exchanges of their own tokens. According to KoFIU, this factor contributes most to the collapse of cryptocurrency ecosystems.