The Korea Financial Conduct Authority has launched an investigation into exchanges to check whether any of them are listing their own currencies. This investigation is a consequence of the bankruptcy of the FTX exchange. Already covered in numerous articles, FTX filed for bankruptcy in the United States on November 11 leaving over 100,000 creditors injured. Customers left the exchange in droves due to doubts about FTX’s capital adequacy.
Korean rules applicable to exchanges
of exchanges they are not allowed to issue their birthmarks. Thus, Korea Financial Intelligence Unit (KoFIU), which is part of Financial Services Commission (FSC), is investigating possible violations of this rule. The Korean regulator has decided to take the lead behind the bombshell caused by FTX. According to an FSC spokesperson, national exchanges cannot issue their own currencies. The financial authorities conducted the first round of investigations. Additionally, they plan to look at more specific details, especially when it comes to quoting local currencies.
Indeed, not only can national exchanges not list local currencies, but the sale, exchange or brokerage of listed currencies is prohibited. The Law on Reporting and Use of Special Financial Transaction Information regulates the sector. One of the exchanges based in Daegu is currently under investigation. It is suspected that FLAT, a currency listed in January 2020, may be the so-called local currency. Financial authorities have confirmed that five major exchanges, including Upbit and Bithumb, have not issued their local currencies. However, reviews for smaller exchanges are not yet complete.
The impact of the FTX 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 puts them in second place behind Japan. The CEOs of the five major stock exchanges have said that a similar incident is unlikely to happen in Korea. Indeed, at a meeting with KoFIU on November 16, the CEOs asserted that Korean law would not allow such an event. They added that the underlying factor in the decline of FTX it is the lack of organization and arrangement. The collapse was reportedly precipitated by the client’s misappropriation of assets and misuse of its local currency, the FTT.
In an effort to preserve the value and stability of FTT before its collapse, Alamada Research, a trading firm co-founded by FTX founder Sam Bankman-Fried, bought and sold most of FTT on the stock market, essentially fixing symbol price. The fall of FTX caused a fall in the prices of cryptocurrencies. That wiped out about $180 billion worth of digital assets this month.
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To the angel of the middlemen of the current monetary system, I oppose DeFi, digital assets and the metaverse. Lawyer in Luxembourg, I am interested in cryptocurrency investment funds.