The Seoul Southern District Court on Friday dismissed the arrest warrant against Terraform Labs’ head of general affairs and business operations, Yoo Mo. Judge Hong Jin-pyo ruled the apprehension unnecessary in the case against Terra, according to reports from the local outlet Yonhap. The Terraform Labs’ official, accused of price manipulation, didn’t deny the allegation but has since been released by authorities.
The judge’s decision is said to have been influenced by several factors, including Mo’s willingness to surrender to authorities after the issuance of his arrest warrant.
Daniel Shin, one of Terra’s earliest backers, was also summoned last Wednesday to appear before lawmakers in a parliamentary audit session held this week on Thursday. Shin, who no longer has a relationship with Terra, responded through a representative who said his appearance and testimony would potentially lead to a conflict-of-interest situation.
South Korean financial regulator to encourage blockchain technology
Speaking during Thursday’s National Assembly’s audit on the Financial Services Commission (FSC), South Korean lawmaker Yoon Sang-Hyun recommended the appointment of a special prosecutor to investigate Terra’s crash in May. Sang-Hyun explained the need for the saying the South Korean government and prosecution hasn’t been able to manage the investigation.
On the other hand, Dunamu CEO Lee Sir-Goo believes that lack of proper regulation is to blame for the outcome of the Terra crash. The FinTech executive, speaking in the same setting, observed that the sweeping impact of the collapse is down to a lack of proper regulatory guidelines in South Korea. While keen to note the flaws in the regulatory system, Lee didn’t point out a specific example.
At the same time, the Financial Services Commission (FSC) announced that it had reintroduced support for blockchain technology and consumer protection in the digital asset trading context.
“In cooperation with the National Assembly, we will actively support the establishment of a regulatory system for virtual assets that balances innovation through new technologies such as blockchain, consumer protection and financial stability,” FSC chair Kim Joo-hyun remarked at the parliamentary audit.
There is no clear indication yet which direction the case around Terra and its co-founder Do Kwon takes. However, the eagerness of South Korea’s market watchdog to back the blockchain industry and also protect market users certainly changes the equation. The FSC is not necessarily lessening its oversight on digital assets but the move could be interpreted as passive readiness to move past the Terra downfall.
TerraUSD crash draws regulatory hammer on stablecoins
The Terra debacle is one of the biggest breakdowns crypto has seen in recent years and it has brought to life the debate on stablecoins. Stablecoins have established themselves as primes to allow investors exposure to cryptocurrencies thanks to their pegging mechanism that makes them relative ‘stable’ instruments. In recent months, there have been questions on the exact value and stability of these coins.
Worth remembering it was only last year that the Commodity Futures Trading Commission fined Tether for misleading investors on the backing of their stablecoin. In a bid to regulate the stablecoins space, the US government could lead these virtual assets into a new era. A recent draft bill championed by House Financial Services Chairwoman Maxine Waters and Ranking Member Patrick McHenry proposes to regulate the space by banning algorithmic stablecoins such as Terra USD for two years.
The bill seeks to prohibit the creation and issuance of “endogenously collateralized stablecoins,” according to a report from Bloomberg. The draft, if passed, would also require that the Treasury conducts research into such stablecoins. This will be in collaboration with agencies like the Office of the Comptroller of the Currency, the Federal Reserve, the Securities and Exchange Commission, and the Federal Deposit Insurance Corporation. The Fed would also explore the idea of a digital dollar, its impact on privacy, and the financial sector. Measures to regulate the issuance of stablecoins for banks and non-bank issuers, too, would be established.
Vitalik Buterin floats market manipulation claims
Ethereum co-founder and developer Vitalik Buterin said in a separate event that the relegated Terra ecosystem was highly centralized. He opined that those in charge likely initiated efforts to manipulate the market to inflate their tokens’ value. In a recent lengthy interview with The New York Times, the Russian-Canadian programmer explained that the Terra collapse has dragged back the entire cryptocurrency industry.
An insistence on decentralized models after the Mt. Gox hacks eight years ago had brought trust to users buying and selling crypto until May this year, when Terra’s mechanism and fundamentally bad economics became its downfall. Decentralized as Terra was, Buterin believes that it had a huge element of centralization, in particular, pointing to the Terraform Labs team’s opaque handling of Bitcoin worth billions in dollars had shored up to defend UST’s peg.
Terra’s flaws have been pointed out by several observers in the crypto space, a testament to the transparency of decentralized, trustless technology. Buterin says that it also demonstrates that not all issues can be resolved by decentralization. He summed up that even though an underlying algorithm could be transparent and open, it could still be a failure if its execution and implementation are wrong.
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