South Korea’s Bumpy Crypto Path Forward

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South Korea’s Bumpy Crypto Path Forward

By James Rubin

Five months ago, South Korea appeared to be making a new beginning where investment and creativity in the cryptocurrency space would flourish. Yoon Suk-Yeo and Lee Jae-myung, the two contenders for president, were competing to win over voters by demonstrating who would be more supportive of cryptocurrencies.

Their back-and-forth highlighted the growing significance of digital assets in the nation, especially among younger voters who have been creating accounts on cryptocurrency exchanges in droves but have been dissatisfied with the restricted policies of former President Moon Jae-In.

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Yoon’s win, which held out the hope of wise regulation to support new initiatives, safeguard investors, and purge the sector of some of its less savory components, now appears to be a blur in the rearview mirror. As it tries to make sense of the TerraUSD (UST) stablecoin crash and other mishaps that are continuing to reverberate through the industry, Korea has increased its monitoring of cryptocurrency exchanges and other firms in recent weeks.

South Korea’s Bumpy Crypto Path Forward

Terra was founded in Korea, and attendees at last week’s Blockchain Week (KBW), which included many of Terra’s original builders, investors and partners, avoided discussing the issue, seemingly more image conscious than interested in addressing the root causes of the implosion.

Heightened scrutiny?

On Thursday, South Korea’s anti-money laundering authority flagged 16 foreign crypto firms it says have been operating in the country without proper regulatory approval. In a statement, the Korea Financial Intelligence Unit (KoFIU), part of South Korea’s Financial Services Commission (FSC), said the firms had advertised crypto and offered services to Koreans without obtaining the requisite registration.

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Last month, prosecutors raided seven cryptocurrency exchanges in South Korea investigating a fraud case in connection with the collapse of UST and the LUNA token that supported it. The targeted companies included Bithumb, Coinone and Upbit.

To be sure, the additional scrutiny is understandable, given the perception among many people that crypto lacks the protections and stability of more traditional assets. The current climate is fragile as projects that helped spur crypto’s growth in Korea and beyond flail and fail, and bitcoin’s price remains badly depressed from its high less than a year ago.

Still promising

But the country remains a hotbed of crypto interest filled with eager investors and developers who will undoubtedly have much to say about the asset’s status in the Asia Pacific Rim region. Among other initiatives, Solana said it would pump up to $100 million into Korean crypto startups as it looks to penetrate a Terra-generated void in the developer market. Solana Ventures and the Solana Foundation will emphasize will seed investments and grants “across all Web 3 verticals.” Polygon, Avalanche and other smart contract platforms have also been eyeing the country’s trove of orphaned crypto developers.

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Earlier this week, local media outlet Edaily reported Thursday that Korea’s financial watchdog wanted to fast-track the review of proposals for new crypto laws. The country’s blockchain industry has bemoaned the slow pace of regulation, which it believes will help the industry mature.

Sometimes progress must overcome a few obstacles.

Important events

2 p.m. HKT/SGT(6 a.m. UTC): U.K. retail sales (July/MoM/YoY)

CoinDesk TV

In case you missed it, here is the most recent episode of “First Mover” on CoinDesk TV:

Rep. Tom Emmer on State of Crypto Regulation, Tornado Cash Debate

The Tornado Cash ban is adding to an already heated debate in Washington, D.C., over who should regulate crypto and to what extent. Joining “First Mover” to share his thoughts is Rep. Tom Emmer of Minnesota. Also joining CDTV was Omid Malekan, Columbia Business School adjunct professor and Nauman Sheikh, Wave Financial managing director.

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