South Korean financial authorities are closely monitoring the havoc on Korean investors estimated at minimum 200,000 from stablecoin Terra’s collapse, although they lack investigative or supervisory authority over the offshore assets.
Korea’s Financial Services Commission and Financial Supervisory Service are said to have embarked on emergency inspections on the crypto market as Luna heads for delisting with its value plunged 99.999921 percent in just a week, according to sources. The Luna crash has sent shockwaves throughout crypto markets worldwide, causing liquid cryptos like bitcoin to crash to incur massive losses to crypto investors.
Luna is an invention by a Korean national, designed to be tied to TerraUSD (UST), a stablecoin pegged one-to-one with the U.S. dollar.
Luna briefly rebounded 400 percent after the world’s largest crypto exchange Binance relisted the coin a day after removal. But experts see it is only a matter of time for Luna to be kicked out of the market since the coin’s creator Do Kwon, CEO of Terraform Labs, on Friday already admitted that Luna and TerraUSD were failures.
The stablecoin’s downfall started on May 7 when Terraform Labs, the company behind Luna and TerraUSD, temporarily reduced TerraUSD’s liquidity to set up a new service. During the period, someone offloaded TerraUSD in bulk, triggering the stablecoin’s crash. As the liquidity was still low, price swung wildly even with the temporary sell-off then began to nosedive as investors turned anxious about the price instability.
In Korea, minimum 200,000 investors are estimated to have parked money in Luna and TerraUSD.
Korean financial authorities cannot take direct actions due to lack of legal ground to regulate crypto firms except for preventing money-laundering activities. Terraform Labs is headquartered in Singapore.
The Luna’s collapse, meanwhile, has pushed investors toward other stable coins, especially USD Coin (USDC) that are considered more stable.
The market cap of USDC, which is backed by U.S. dollar and short duration U.S. treasuries, hit a record high of $51 billion on Sunday, up 5.4 percent from $48 billion on May 6, before TerraUSD’s crash. TerraUSD’s market cap plummeted 98 percent, from 23.7 trillion won ($18.5 billion) to 520 billion won, over the same period.
By Choi Keun-do and Cho Jeehyun
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]