South Korea investigates Crypto Exchanges to avoid FTX-like scenarios in the country

  • KoFIU, their financial watchdog, has investigated the country’s crypto exchanges thoroughly. 
  • It is evident that in FTX and similar incidents, native tokens and coins played a major role.
  • And to make sure such incidents are not repeated in the country, KoFIU is warning exchanges against the issuance of native coins or tokens.

After the FTX collapse, South Korea is taking any and all measures to prevent such incidents from being repeated. For this reason, the Korea Financial Intelligence Unit (KoFIU) is investigating the crypto exchanges in the country for issuance of internal tokens. 

If we are to look closely at all crypto exchange collapses, the native token or native crypto assets played a major role in their demise in one way or another. 

The KoFIU is the country’s financial watchdog, similar to the states’ Securities and Exchange Commission (SEC). It took note of this and opened an inquiry in the country for all the crypto exchanges regarding listing their own internal and self-issued coins. 

It has been illegal for Korean Crypto exchanges to issue native tokens since the beginning, but still, they wish to imply regulatory compliance on the exchanges for investors’ protection.

Flata exchange is one of the main suspects in their investigation for listing their coin FLAT in January 2020. This came to the authorities’ knowledge, who are now investigating the exchange. – According to Yonhap, a local media outlet.

Although KoFIU has cleared bigger exchanges such as UpBit and Bithumb, after a thorough investigation, the smaller exchanges indigenously operating in the country face strict scrutiny from the authority. Though the initial investigation cleared all exchanges, the officials at the FSC (Financial Service Commission) want to ensure they are all free of any and all misconduct, saying, “there are still some doubts relating to the internal token listing.”

South Korea is going all in on the laws and regulations for the country’s crypto market because, according to estimates, there are around 6,000 Korean investors in FTT, with total holdings to be around 110,000 units. Also, the country’s internet users are ranked second only after Japan in importance, contributing 6% of total FTX’s internet traffic in October, according to Similarweb. Also, 297,229 unique South Korean users visited on a monthly average basis, according to CoinGecko. This again intensifies the impact of the collapse in the country. 

With the order of Seoul Southern District Court, South Korean authorities froze the assets of FTX co-founder Shin Hyun-Seong, suspecting that he might have benefited from LUNA’s unauthorized sale, roughly amounting to $104.4 million until the end of the ongoing investigation.

Changpeng Zhao, CEO of the biggest crypto exchange in the world, in a meeting with KoFIU on November 16, said there is a very remote possibility of an event like FTX occurring in the country.   

KoFIU and CZ, in their discussion, continued claiming that the root cause of FTX collapse was improper use of clients’ assets and abuse of native token FTT.