South Korea to change its legal framework to better control crypto projects

In the wake of the collapse of Terra LUNA and the bankruptcy of FTX, authorities from South Korea are proposing new amendments to the Digital Asset Law to bring greater control over cryptocurrency exchanges.

Congressman Yoon Chang-hyun is preparing an amendment to expand the oversight capabilities of financial authorities to prevent a recurrence of events such as the collapse of FTX.

According to local news outlet News 1, Chang-Hyun is proposing to give more power to the country’s Financial Services Authority and Financial Supervision Service “instead of self-regulating” cryptocurrency exchanges.

Yoon Chang-hyun of the People’s Power Party plans to propose a revision of the Safe Digital Asset Transaction Bill at the First Law Review Subcommittee of the National Assembly Political Committee held on the same day.

South Korea wants to protect investors from another FTX-like crash

The new amendment to the Digital Asset Law requires mandatory segregation of customer deposits. It also provides greater control to financial authorities against unfair business practices.

This means that regulators will be able to monitor and scrutinize cryptocurrency projects and exchanges to protect investors from millions of losses like the one caused by Terra LUNA.

Notably, South Korean prosecutors issued an arrest warrant in cooperation with Interpol to capture Do Kwon, the founder of Terra, who remains on the run — though he denies it — after being accused of fraud over the collapse of the UST stablecoin. .

This is not an isolated effort. Other regulators around the world have called for stricter laws with Terra and FTX as examples. The United States is leading these efforts and organizing hearings to better understand the situation.

The exchanges will not be able to use their clients’ funds

Another important change in the Digital Assets Act is that cryptocurrency trading platforms will not be able to arbitrarily confiscate users’ deposits once they are sent to a custodian, as happened with FTX and Alameda Research.

Additionally, the new law removes the “self-regulatory” power of cryptocurrency exchanges to take “appropriate measures” in the event of price fluctuations or irregular trading volume, leaving control of such activities in the hands of financial authorities.

Exchanges will now be required to immediately report any illegal activity to the Governor of the Financial Conduct Authority, who will be responsible for taking appropriate action to prevent fraud, money laundering or other crimes.

According to an unnamed National Assembly official, the change to the law was made to “reflect on the FTX incident and prevent its recurrence.”

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