The liquidity crisis of FTX has shaken up the entire world, which is not simply limited to the community of crypto enthusiasts. Plus, the LUNA meltdown did nothing good despite being the first in the sequence of the crypto crashes. South Korea, following these incidents, has decided to modify its legal framework with an extended capacity to authorities.
This will give them greater control over exchanges engaged in cryptocurrency. New amendments have been proposed to the Digital Assets Bill to prevent incidents like LUNA and FTX from happening. Congressman Yoon Chang-Hyun has undertaken the responsibility of delivering the proposed amendments.
According to media reports, Yoon Chang-Hyun is expected to grant more authority to the Financial Services Commission & Financial Supervisory Service. The objective is better to control crypto exchanges to protect investors from losing their funds.
Unfair trading practices can be reported to the Service as per the amendments. Regulators will be able to supervise the functions from their side as well, helping to protect millions of funds.
This is not the first time South Korea has displayed firm action over crypto exchanges. Previously, the region issued an arrest warrant to capture Do Kwon over the fraud committed behind the collapse of the UST stablecoin. Do Kwon is the Founder of Terra, who remains responsible for the great fall of the crypto community.
The amendment, if passed, will also have control over how exchange platforms use the funds. In the simplest form, trading platforms will not be allowed to seize their customers’ funds, something that recently happened with FTX. Traders were unable to withdraw their funds despite submitting requests for the same. FTX instead declared a liquidity crunch and halted the withdrawal process.
The modified law also eliminates the power of self-regulation, not allowing exchanges to take appropriate measures amid irregular fluctuations in terms of trading volume and prices.
Reportedly, the amendments have been in after thoroughly reflecting on the recent FTX incident to prevent the same thing from happening in the country.
Exchanges get the power to report any unfair trade practices so that fraudulent activity can be prevented. Exchanges will have to submit the report to the Governor of the Financial Supervisory Service. The Governor will be responsible for preventing fraud, money laundering, and any other crime.
The FTX crisis came like a strong wave. It took a larger portion of funds to make it unavailable for withdrawal. Another similar incident is likely to pose a greater danger to the traditional economy that ultimately has to bear the burden of such losses. Greater control over authorities will bring exchange platforms under scrutiny, which will also be able to report incidents to prevent fraud and other similar activities from happening.
A modified legal framework is being discussed worldwide, with the US taking the leading charge through scheduled hearings.