South Korea probes exchanges listing native tokens after FTX collapse

FTX’s collapse this month has sparked a slew of regulatory actions worldwide as authorities scramble to protect their financial systems from contagion. The latest is South Korea, where the Financial Services Commission (FSC) is probing exchanges for listing their native tokens.

While Sam Bankman-Fried’s leadership and the lending of user funds to related entities like Alameda Research were the biggest factors for FTX’s downfall, FTT also played a big part. It was revealed that Alameda was the biggest holder of FTT and would buy and sell the tokens on FTX in a price-setting dynamic. When a bank run on FTX ensued, the token crumbled, and SBF’s house of cards ultimately collapsed, wiping out tens of billions of dollars.

South Korea is seeking to protect its economy from a similar debacle. According to local reports, the FSC, through the Korea Financial Intelligence Unit (KoFIU), has launched an investigation into local exchanges to examine whether they have been listing their own tokens.

In Korea, exchanges are prohibited from self-listing their coins by the Act on Reporting and Using Specified Financial Transaction Information. They are also barred from selling or exchanging tokens listed by people related in any way to the exchange.

The FSC has already conducted its first round of investigations into the self-listing. Reports indicate that the regulator has given the five largest exchanges, including Upbit, Bithumb, and Korbit, a clean bill of health.

The reports further indicate that the main target for the regulator is the Flata exchange. It’s alleged that Flata listed its own token, FLAT, in January 2020.

South Korea has been one of the worst-affected countries by the collapse of FTX. In October, just before the exchange’s collapse, only Japan accounted for more users of FTX, according to SimilarWeb data. CoinGecko data further shows that this year, South Korea accounted for the most users at FTX at over 297,000, ahead of Singapore, Japan, and Russia, respectively.

Local reports added that over 6,000 FTT owners collectively owned over 110,000 FTT tokens.

Despite the contagion, CEOs of the five major digital asset exchanges assured the FSC in a meeting last week that a collapse similar to FTX is unlikely in Korea because of the Act, which bars self-listing.

Watch: The BSV Global Blockchain Convention panel, Tokenizing Assets & Securities on Blockchain