(ATTN: ADDS FSS’ report in last 3 paras)
SEOUL, May 24 (Yonhap) — South Korea will intensify global cooperation to better regulate the crypto asset market amid growing worries over excessive volatility demonstrated in the recent collapse of TerraUSD and Luna cryptocurrencies, a senior government official said Tuesday.
The crash of TerraUSD, known as a “stablecoin,” and its sister coin Luna caused massive losses to many investors across the world, raising the need to better regulate the fast-growing market and protect investors from excessive volatility.
“Given the crypto asset’s nature of decentralization, anonymity and no national borders, it is important to strengthen international cooperation,” Kim So-young, deputy chief of the Financial Services Commission (FSC), told a meeting with lawmakers.
“In order to draw up effective regulatory systems on crypto assets, we will closely review overseas cases of regulations and strengthen cooperation with international organizations and major countries,” he added.
He also said the government will make efforts to come up with measures to regulate such new types of digital assets as stablecoins that could affect the overall financial market.
A latest FSC report shows there had been around 280,000 users of the TerraUSD and Luna cryptocurrencies in South Korea as of last Wednesday. The holdings were valued at around 33.9 billion won (US$26.8 million), which represented 0.08 percent of the domestic crypto asset market.
The crypto asset market has been growing at a fast pace recently with such new types of coins made available to investors. Many countries are now looking into the impact the digital assets could have on the overall financial system, investors, monetary and economic policy directions, Kim said.
There are currently 13 crypto market-related bills pending in the National Assembly.
The FSC will join lawmakers for legislation designed to protect investors from swings in the crypto asset markets going forward, he added.
In a report to the meeting, the Financial Supervisory Service (FSS), anther financial regulator, said the possibility is slim that the recent cryptocurrency crash will spill over into the broader financial market but it will carry out on-spot inspections into some digital asset service providers to stave off any adverse impact in a preemptive way.
It, however, warned “algorithmic” stablecoins, such as TerraUSD, are a high-risk investment relying upon “financial engineering” without being backed by any assets and are vulnerable to speculative forces, as there are few relevant regulations in place.
The FSS said it will also review other countries’ efforts for legislation with regard to crypto assets and seek close cooperation with regulators in major countries for better risk management.