Leading South Korean crypto exchanges have resolved to form a consultative body to prevent the recurrence of similar incidents like the Terra (LUNA) ecosystem crash that resulted in significant losses.
The exchanges, including Upbit, Bithumb, Coinone, Korbit, and Gopax, seek to come up with strict and standard screening measures before listing cryptocurrencies by the second half of 2022, South Korean news outlet YNA reported on June 13.
Notably, the exchanges’ resolution comes after most trading platforms came under the spotlight due to a lack of unison in handling the Terra ecosystem collapse.
The latest plan to avoid similar cases emerged from a meeting with the government dubbed ‘Recovering fairness in the virtual asset market and protecting investors.’
Developing screening guidelines
As the initial part of the agreement, the exchanges reportedly inked a business agreement before forming the joint consultative body. The next focus on developing improved listing-related standards that can be used as a communication channel to respond to emergencies.
Under the proposal, the consultative body will be divided into transaction support, market monitoring and compliance monitoring.
The first major part of the plan will be available in September when a virtual currency warning system and delisting standards will be made public. It will also provide information on cryptocurrencies like white papers and evaluation reports.
In a crisis like the LUNA crash, the consultative body will develop crisis plans and discuss factors like if it is appropriate to allow deposits and withdrawals. The feedback is said to be offered within 24 hours.
By October, the body is also set to publish new crypto screening guidelines alongside the introduction of a period evaluation of risks.
The group acknowledged that they would be moving away from the previous approach of evaluating cryptocurrencies based on technical efficiency. However, the new guideline will look at the feasibility of a project by assessing factors like Ponzi-type fraud.
Additionally, the policy will explore other crypto-related vices like the potential for money laundering while including input from external experts when reviewing new virtual currencies.
Elsewhere, the exchanges will take action in the event of a high risk of money laundering or when abnormal additional issuance that is not related to the whitepaper.
Furthermore, the body will be tasked with investor education, where exchange users will be required to access educational material before purchasing any digital asset. In line with consumer protection, all crypto investment advertisements will be accompanied by warnings.
Notably, South Korean authorities had been pushing to form a committee focusing on strict crypto regulation in the immediate aftermath of the Terra crisis.