According to South Korea’s local media reports, two South Koren financial authority agencies have started “emergency” investigations into local crypto exchanges in response to the collapse of Terra. In addition, a parliamentary member who is also a member of the ruling party by the name of Yun Chang-Hyun has also requested a parliamentary hearing calling Terraform Labs CEO Do Kwon and local exchange executives as witnesses.
These developments show that South Korea could be zeroing in on the crypto industry after the drastic Terra meltdown.
The two South Korean financial regulatory authorities that have started an investigation into Terra’s fall are South Korea’s Financial Services Commission and the Financial Supervisory Service.
Enhancing investor protection
The two financial authorities are inspecting South Korean local exchanges in a bid to enhance the security of crypto investors in the wake of the Terra collapse.
The local crypto exchanges have been requested to share data on LUNA and UST transactions including price movements, trading volume, and the number of affected investors.
It is reported that a local exchange official told one of the media outlets in South Korea that local authorities had last week “asked for data on the number of transactions and investors, and size up the exchanges’ relevant measures.”
Why is South Korea investigating Terra’s collapse?
The Terra blockchain, which hosts both the UST stablecoin and the LUNA token, was developed by a Singaporean-based company called Terraform Labs, which is led and co-founded by Do Kwon.
The UST stablecoin, which is an algorithmic stablecoin started de-pegging from its US dollar parity around May 8 and despite Terraform Labs and the Luna Foundation Guard’s efforts to stop the debacle using its Bitcoin reserve fund, the UST and LUNA did not stop falling. Both the UST and LUNA tokens erased a $40 billion cap in a span of one week.
As a result of the catastrophe, billions of dollars were wiped out of the crypto market. It is suspected that about 200,000 South Koreans are part of those affected by the collapse; something that explains the sudden interest by the South Korean local authorities.
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