Following LUNA UST crash, South Korea emphasizes need for digital currency regulations

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The government of South Korea is working on a new regulatory framework for the digital currency industry. Following the recent crash of the South Korea-made digital currencies, LUNA and UST, authorities in the country have reiterated the need to speed up digital currency regulations efforts. 

One offshoot of the crash of the Terra blockchain tokens is that even more efforts will go into work on the Digital Assets Basic Act (DABA). According to a local report from Yonhap News Agency, regulators in the country are now undertaking an emergency assessment of digital assets intending to have the bill passed sooner. 

The report also notes that officials from the Financial Services Commission (FSC) and Financial Supervisory Service (FSS), the two regulatory bodies in charge of digital assets, have said they will use the Terra debacle to raise awareness among digital asset investors following the LUNA meltdown, officials said.

The officials revealed that, at the moment, the government could only take such steps since it has no legal grounds to take action against Terra. South Korean digital currency regulators only have the mandate to prevent money laundering and terrorism financing from being carried out with the assets. 

“In regards to the Luna incident, we are monitoring the overall situational changes, but there isn’t a direct measure the government can take at this moment. There is no ground for the government to intervene because coin transactions are being freely operated by the private sector,” a spokesperson for the agencies said.

However, this may change with the passing of the DABA bill. The bill is intended to be enacted in 2023, with enforcement to start in 2024, after which digital currency tax reforms will be considered. Details of the provisions in the bill are also still not clear. 

South Korea is not the only government zeroing in on Terra’s crash 

The crash of the Terra tokens has affected the entire digital currency market. Amidst the repeated pumping and dumping of both LUNA and Terra over the last few days, some analysts have also warned that the bearish sentiments the tokens are causing in the digital currency market may spill over into the stock market. 

Investigations have also shown that Terra USD is not the first stablecoin disaster that Do Kwon, the founder of Terra, has been behind, according to a report by The Australian. 

Meanwhile, the crash of the Terra tokens has also been noted by U.S. regulators as a prime example of the dangers that so-called stablecoins pose. Treasury Secretary Janet Yellen told Congress that the rapid growth of stablecoins could soon make the assets a threat to financial stability, especially as they are proving to be not-so-stable.

Watch: CoinGeek New York presentation, The Path to BitCoin Adoption: How to Turn the Entire Web into Bitcoin Apps