South Korean regulator to audit Terra

Also, after the rate collapse of UST and LUNA, the Financial Supervisory Service intends to classify cryptocurrencies by types of risks

25.05.2022 - 07:25

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2 min

What’s new? The Financial Supervisory Service (FSS) of South Korea will conduct an on-site audit of Terraform Labs and financial services related to the TerraUSD (UST) stablecoin and its backing token LUNA. The FSS also said it intends to bring in a third-party organization to enhance monitoring of the cryptocurrency market. The regulator plans to introduce a classification of digital assets by types of risks and analyze the “unfair” operating conditions of local cryptocurrency exchanges. This is reported by Yahoo Finance.

News on the Yahoo Finance website

What are the inspections related to? At an emergency meeting of the National Assembly on Tuesday, May 24, the FSS said that the main purpose of the audit is to prevent the damage from the rate collapse of UST and LUNA from spilling into the financial markets. According to reports from the South Korean regulator, investors have lost significant amounts of their savings as a result of the loss of the UST stablecoin peg to the US dollar.

What events happened before? On May 8, the rate of the algorithmic stablecoin UST lost its peg to the dollar and dropped to $0,22 in the following days. The LUNA token rate also collapsed by 86% per day. As of May 25, the UST rate stands at $0,066 and LUNA at $0,00017 (Binance data).

In mid-May, it became known that Terraform Labs CEO Do Kwon liquidated the South Korean organization a few days before the ecosystem collapsed on May 6. After that, he tried to relocate the company to Singapore, but he failed to obtain the necessary licenses in time. The local regulator suspended the issuance of documents just because of Terra’s collapse.

The country’s authorities recreated a special organization to investigate financial and securities crimes. The organization is investigating the collapse of Terra as its first case. For a full timeline of the events surrounding the rate collapse of UST and LUNA, see GetBlock Magazine’s special feature.

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