NewsBusiness

South Korea Lawmaker Calls for Enquiry Into Exchanges' Terra Activities

People Power lawmaker Yun Chang-Hyun alleges that various domestic exchanges saw the UST depeg as an opportunity for unscrupulous profiteering.

3 min read
Banks in South Korea are mulling crypto custody services. Image: Unsplash

A conservative politician in South Korea is calling for hearings to be held into questionable actions carried out by some of the country’s top crypto exchanges during the LUNA crisis, according to a report by NewsPim.

Speaking at a plenary meeting of the National Assembly's Home Affairs committee today, People Power lawmaker Yun Chang-Hyun called for a parliamentary hearing into the historic collapse of Terra last week. 

Yun wants “relevant exchange officials” to be present at the hearing as well as a representative of Terra’s CEO, Do Kwon, who is a Korean national. 

"Coinone, Korbit and Gopax stopped trading on May 10, Bithumb on May 11, but Upbit did not stop until May 13," said Yun. 

"Upbit, which was the last to stop trading even after seeing the crash, is the number one company with an 80% market share. In those three days, it earned nearly 10 billion won [$7.8 million] in commissions," he added.

Crypto in South Korea

Even before the Terra catastrophe South Korean regulators have been tightening up on domestic crypto exchanges. 

In March of last year, South Korea’s Financial Services Commission (FSC) began cracking down on domestic crypto companies that weren’t doing enough to combat money laundering. 

As of April 2021 onwards, exchanges have been subject to fines of between $26,000 to $52,000 if they did not report suspicious activity, or log their transactions. 

South Korean cryptocurrency exchanges were dealt a blow that summer when the FSC said it was banning cross trading. Cross trading is when an investor takes the earnings from one transaction and uses them to place an order for another without actually exiting the order. The two transactions are recorded as one on the blockchain. 

An example of cross trading would be this: let’s say Do Kwon buys one Bitcoin at today's price of $30k. Tomorrow he checks and the price has risen to $34k. he then decides to sell $4k worth and immediately buy 2 ETH with the profits without interrupting the order. Having performed a cross trade, he now has $30k worth of Bitcoin and 2 ETH in one transaction.

Under the new regulations, Korean exchanges were given until September 24, 2021 to apply for a license to trade—those who did not were no longer legally allowed to operate. 

More broadly, South Koreans last year elected Yoon Suk-yeol, a pro-crypto President from the People Power party. Yoon promised to overhaul what he sees as “unreasonable crypto regulations. 

Meanwhile, a South Korean crypto exchange executive and a captain of the national army were arrested last month for leaking military secrets to North Korea. The two suspects were allegedly paid in crypto and instructed by a North Korean spy.

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