South Korea

The legislation, separate from the upcoming Digital Asset Basic Act, may came into force already in 2023.

In the aftermath of the Terra collapse last spring, South Korean legislators intend to ramp up legislation, putting specific emphasis on the protection of investors in virtual assets — i.e. digital currencies — and harshening penalties for unfair trade acts in the industry.

According to local media, the Financial Services Commission (FSC) and the National Assembly are working to pass a bill that would enable financial authorities to monitor and punish unfair trade practices such as the use of undisclosed information, price manipulation and fraud while supervising crypto exchanges.

The legislation bears an emergent character: While there are already 14 different proposals regarding crypto and digital assets circulating in the National Assembly and the ambitious and comprehensive Digital Asset Basic Act in the making, this one should guarantee more investor protection starting from 2023.

As an unnamed official from the National Assembly told the press:

“In the U.S., since the Securities and Exchange Commission (SEC) exercises a wide range of powers, it is possible to punish unfair trade in virtual assets without separate legislation, but in Korea, related legislation is absolutely necessary.”

While there are no details on the specific penalties for various malpractice, it is expected that they will be designed in order to synchronize the supervision and punishment at a level similar to that of the traditional financial industry. 

Related: The SEC should be aiming at Do Kwon, but it’s getting distracted by Kim Kardashian

South Korean authorities issued an arrest warrant for the Terra co-founder Do Kwon in September, which was subsequently dismissed, and Interpol added Kwon to its Red Notice list, requesting law enforcement locate and potentially detain him. On Oct. 6, South Korea’s foreign ministry ordered the Terra co-founder to surrender his passport or it would be canceled.

At the end of October, FSC revealed that it would monitor crypto whales with assets of over 100 million won ($70,000) to prevent money laundering efforts using digital assets.

In his decision to dismiss the warrant, the judge reportedly considered that Yoo Mo had a residence and family ties in South Korea and was already barred from leaving the country.

The warrant for Yoo Mo, the head of the business team of Terraform Labs, has reportedly been dismissed less than 48 hours after it had been issued.

According to an Oct. 6 report from South Korea’s Yonhap News Agency, Judge Hong Jin-Pyo of the Seoul Southern District Court said it was difficult to see the “necessity and significance” of arresting Yoo. The prosecutor’s office in the same jurisdiction reportedly issued a bench warrant for the Terraform Labs executive on Oct. 5 for charges that included violating the Capital Markets Act and fraud by manipulating the price of TerraUSD (UST) — now TerraUSD Classic (USTC).

The judge reportedly considered the fact that Yoo had a residence and family ties in South Korea and was already barred from leaving the country in his decision. In addition, he questioned whether the LUNA token qualified as an “investment contract security” under Korea’s Capital Market Act. Yoo has reportedly not disputed his involvement in operating and managing one of Terra’s automated bot programs, which were at the center of the scandal.

Yoo was the first individual to have potentially faced charges after the collapse of Terra in May. Prosecutors have the option of reapplying for an arrest warrant.

In September, a South Korean court issued an arrest warrant for Terra co-founder Do Kwon, followed by Interpol adding his name to its Red Notice list. At the time of publication, Kwon’s whereabouts were unknown. Reports have suggested the Terra co-founder may have left Singapore, but South Korea’s Ministry of Foreign Affairs ordered him to surrender his passport by Oct. 20 or risk having the international travel document voided.

Related: Terra could leave a similar regulatory legacy to that of Facebook’s Libra

The case against Kwon and Terra has had many legal implications for businesses in the crypto space. In September, the deputy minister of Indonesia’s Ministry of Trade proposed requiring two-thirds of the directors and commissioners at crypto firms to be citizens, reportedly to prevent them “from fleeing the country if any problem arises.”

A South Korean court dismissed an arrest warrant for a Terraform Labs employee, a move that came hours after reports emerged about his arrest.

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