The Korean financial authority has launched an investigation into the exchanges to see if any of them are listing their coins. This investigation is the consequence of the bankruptcy of the FTX exchange. Already covered in a slew of articles, FTX filed for bankruptcy in the US on Nov. 11 leaving more than 100,000 creditors hurt. Clients fled the exchange en masse due to concerns about FTX’s capital adequacy.
Korean rules applicable to exchanges
Exchanges are not allowed to issue their own native tokens. Therefore, the Korea Financial Intelligence Unit (KoFIU), which is part of the Financial Services Commission (FSC), looks into probable violations of this rule. The Korean regulator decided to take the initiative after the bomb caused by FTX. According to an FSC spokesman, national exchanges cannot issue their own currencies. The financial authorities have carried out the first round of investigations. Also, they plan to look into more specific details, especially when it comes to listing native coins.
In fact, not only can national exchanges not list native currencies, but the sale, exchange or brokerage of listed currencies is prohibited. The Law on the Reporting and Use of Specific Financial Transaction Information regulates the industry. One of the Daegu-based exchanges is currently under investigation. It is suspected that FLAT, a coin listed in January 2020, may be a so-called native coin. Financial authorities confirmed that top five exchanges, including Upbit and Bithumb, have not issued their own native coins. However, the reviews on smaller exchanges are not yet complete.
The impact of FTX’s collapse in South Korea
According to local press, the number of Korean investors in FTX is around 6000. Korean users generated 6% of FTX’s Internet traffic in October. According to Similarweb, this figure places them in second place behind Japan. Chief executives of the five major exchanges said a similar incident was unlikely to happen in Korea. Indeed, in a meeting with KoFIU on Nov. 16, the CEOs said Korean law would not allow such an event. They added that the key factor in the collapse of the FTX is the lack of organization and regulation. The collapse was reportedly precipitated by the misuse of customer assets and the misuse of its native currency (FTT).
In an effort to maintain the value and stability of FTT before its downfall, Alamada Research, a trading firm co-founded by FTX founder Sam Bankman-Fried, bought and sold most of FTT on the exchange, essentially fixing the price of the token. The collapse of FTX triggered a drop in cryptocurrency prices. That wiped out an estimated $180 billion in digital assets this month.
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To the angelism of the intercessors of the current monetary system, I oppose DeFi, digital assets and the metaverse. Lawyer in Luxembourg, I am interested in cryptocurrency investment funds.