On Tuesday, 24 May, financial regulators held an emergency session in the National Assembly of South Korea regarding the potential consequences of Terra’s collapse. Local media reported this, citing statements from the agencies.
Representatives from the Financial Supervisory Service (FSS), the Fair Trade Commission (FTC), and the Financial Services Commission (FSC) attended the hearings.
According to Yonhap News Agency, in FSC’s financial intelligence unit they described the incident, in which the Terra team, in an attempt to stabilise the price of UST, caused an uncontrollable rise in the supply of the cryptocurrency LUNA, a “death spiral”.
According to investigators, before the project’s ecosystem collapsed, about 100 000 people in South Korea held LUNA. Ten days after the UST parity to the US dollar was lost, their number rose to 180 000.
FSC is considering creating a regulatory framework for the regulation of stablecoins and the DeFi sector.
“Given such characteristics of virtual assets as decentralisation and anonymity, as well as their cross-border nature, it is necessary to ensure consistency with global norms and strengthen the cooperative system to ensure effective regulation,” the department noted.
At the meeting, FSS Senior Vice-President Lee Chan-woo said the regulator plans to conduct checks on companies that provide Terra-related financial services, Money Today reports.
The official said the possibility that the crisis would affect traditional markets was unlikely. However, to mitigate risks the regulator would take measures.
FSS will also assemble a research team focusing on analysing crypto-related risks. The aim is to classify digital assets by their degree of reliability.
The FTC, in turn, intends to verify that Bitcoin exchanges comply with the Commission’s recommendations on user agreements, Yonhap News Agency reports.
In 2021 the regulator ordered 16 local companies, including Bithumb and Dunamu, to revise their standard contracts, deeming them “unfavourable for customers”.
Earlier reports indicated that an inter-agency group would investigate the Terra collapse, consisting of prosecutors and financial regulators.
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