Since this year, the collapse of a number of cryptocurrency exchanges and ecosystems has been attributed primarily to native cryptocurrencies, the most recent example of this being the shocking downfall of FTX.
The Korea Financial Intelligence Unit (KoFIU), Korea’s financial regulation authority, took note of the situation and launched an investigation into cryptocurrency exchanges to determine whether an exchange is listing its in-house, self-issued tokens.
According to a report, the investigation follows the collapse of the FTX cryptocurrency exchange, which filed for bankruptcy in the United States on November 11, as users left the exchange due to capitalization concerns and withdrawals were suspended. The uncertainty as to whether FTX had enough capital heightened the concerns.
According to an FSC spokesperson,
“Domestic exchanges are restricted from issuing their own coins.”
Initial investigations revealed that all cryptocurrency exchanges operating in South Korea comply with all relevant rules and laws. However, the Financial Services Commission (FSC) spokesperson disclosed plans for a more thorough investigation because “there are still some doubts related” to in-house token listings.
According to the Yonhap report, one of the exchanges under investigation is the Flata Exchange, a Daegu-based cryptocurrency exchange. FLAT, a coin listed in January 2020, has prompted suspicions that it might be a native coin.
Major exchanges like Upbit and Bithumb have been cleared by the authorities, and financial officials have certified that they have not released their own native coins. However, smaller exchanges will receive more attention in the investigations.
In a meeting with KoFIU on November 16, the CEOs of the five largest cryptocurrency exchanges stated that due to the act, it is unlikely that an occurrence like what happened to the FTX will occur in Korea. They noted that the primary cause of the FTX collapse was due to “management’s inappropriate use of customers’ assets and the misuse of its native coin FTT.”
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