News1 reported that Kim Byung-wook, an MP for the opposition Democratic Party, told a group of blockchain industry leaders and financial regulators at a summit that leading trading platforms should launch an “investor protection fund.”
He was quoted as saying:
“If exchanges created [such] a fund, the market would develop more soundly and investors would enjoy greater protection – even before new legal measures are introduced.”
The government has repeatedly spoken about the need to boost crypto investor protection after thousands of citizens sustained heavy financial losses at the start of the bear market in May. The “LUNAC/Terra incident,” as South Korean lawmakers and media professionals have dubbed it, is likely to become a catalyst for major regulatory reform.
The government has stated that it will create a special bill to regulate the market – and will place investor protection at the heart of this new law.
However, Kim warned that Seoul should not become too focused on protecting investors. He stated that overly restrictive efforts would stifle the crypto industry’s ability to grow.
“If we only focus on the negative aspects of the cryptocurrency market, domestic wealth could flow abroad. Simply suppressing the domestic market will not stop people from investing [in crypto].”
He added that politicians and regulators now “need to approach [crypto] futures and margin trading from a new perspective.”
And Kim added that the previous government’s legislative attempts to stop non-Koreans from using domestic exchanges were misguided.
He called for an urgent review of this policy, hinting that barring overseas crypto users from making use of South Korean trading platforms was doing little to help the domestic crypto sector grow.
Meanwhile, in an exclusive article, Seoul Kyungjae reported that Uprise, a domestic crypto firm that has previously received backing from the internet giant Kakao and the banking heavyweights Shinhan and Kookmin, lost an eye-watering 99% of its clients’ funds by betting big on LUNAC futures prior to May’s cataclysmic crash.
The AI technology had taken a short position on LUNAC at the exact time of the crash, the media outlet explained, but sudden pumps that followed the initial price slump sealed the bet’s fate.
Uprise, which hinted that it may consider attempting to compensate its customers, blamed the incident on “unexpectedly high levels of volatility in the market.”
Uprise had billed itself as a crypto futures trading platform that made use of AI-powered bot technology. But its bots were powerless to stop some USD 20 million worth of client funds from going up in smoke.
The firm had claimed that removing the human element from crypto trading could “minimize” crypto-related “risk,” but, as the newspaper put it, “even AI technology had no choice but to incur losses when unprecedented turbulence hit the market” as LUNAC crashed in early May.
The media outlet concluded that “skepticism” about the bot and AI-powered technology “in the cryptoasset market” was “expected to grow in the future.”