This year, most recently during the FTX meltdown, native crypto assets have been the primary cause of the downfall of multiple exchanges and ecosystems. The Korea Financial Intelligence Unit (KoFIU), the country's financial watchdog, took note of this and opened an inquiry into crypto exchanges about the listing of their own internal and self-issued coins.
Due to the decline in the value of its proprietary token the FTT or the FTX Token, crypto exchange FTX and its 130 connected companies recently filed for bankruptcy. KoFIU is now looking into Korean crypto exchanges (even though it is illegal for them to issue native tokens) in order to assure regulatory compliance for investor protection.
According to local media outlet Yonhap, Flata Exchange is one of the main suspects and is under investigation for listing its own coin, FLAT, back in January 2020. Authorities have cleared major exchanges like Upbit and Bithumb, therefore the investigations will be more concentrated on smaller exchanges.
Initial checks showed that all crypto exchanges in South Korea were operating legally. A Financial Services Commission (FSC) representative, however, stated that a more thorough inquiry is anticipated because "there are still some doubts relating" to the internal token listings.
There are around 6,000 Korean investors in FTT, and their holdings number 110,000 units, according to estimations made by the local press. Korean internet users, who are ranked second after Japanese users in terms of importance, contributed 6 percent of FTX's internet traffic in the month of October, according to Similarweb.
According to a CoinGecko investigation, 297,229 unique South Korean users visited FTX.com on a monthly average, making South Korea one of the nations most negatively impacted by FTX downtime. Notably, South Korean authorities froze roughly $104.4 million (140 billion won) from FTX co-founder Shin Hyun-seong on the grounds that he may have benefited from LUNA's unauthorised sales. The choice to freeze Shin's assets up until the end of the investigation was approved by the Seoul Southern District Court.
The CEOs of the biggest crypto exchanges across the globe have already stated that it is extremely improbable that an incident similar to what happened with the FTX will occur in Korea as a result of the act in a meeting with KoFIU on November 16. They continued by claiming that management's improper use of clients' assets and abuse of its native token, FTT, were the root causes of the FTX collapse.
The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash