Financial authorities should prepare for external variables
Cryptocurrency markets are fluctuating wildly, following the bankruptcy filing by FTX, the world's third-largest crypto exchange. Now, Crypto.com, which is in the top 10, is also faltering. Cryptocurrency transactions have no borders. Although these exchanges are based overseas, domestic investors who traded on FTX risk losing all their deposits. Investors who purchased coins issued by Crypto.com will also likely suffer significant losses.
The apparent cause of the ongoing crisis is the lack of liquidity. However, the underlying reason is in fact due to these exchanges' illegal and irregular operations. According to overseas media reports, FTX withdrew clients' money, invested more than $10 billion into an insolvent affiliate and lost nearly $2 billion. As well, more than $500 million worth of cryptocurrencies was said to have been stolen from FTX in a cyberattack, which occurred around the time of the bankruptcy filing.
If all these prove true, they are tantamount to embezzlement, breach of trust, window dressing and financial fraud. Cryptocurrency markets are based on the trust that exists among participants. As seen in the domestic crypto fiasco caused by the Terra-Luna ecosystem controversy in May, if exchanges lose investor confidence, not only does the currency value plunge, but also the market itself is shaken. Numerous warnings have been issued about the risk of investing in cryptocurrencies. Investors should be solely responsible for their losses.
The exchanges that caused recent controversies are headquartered overseas. Therefore, Korean investors cannot complain to the government about the losses they have incurred. Nor are there ways to compensate for the losses according to domestic procedures. However, the government and financial authorities should not just sit and watch the situation because the state is responsible for protecting people from risky and fraudulent financial instruments.
According to FTX's site traffic, by country from August to October, Korea accounted for 6.01 percent of the total users. The authorities must accurately check the Korean victims and their losses. The regulator also ought to ensure the stable operation of the domestic cryptocurrency market. Officials can start by checking whether the exchanges have accumulated enough reserves to prepare for investors' mass withdrawal of funds.
Cryptocurrency markets are fluctuating wildly, following the bankruptcy filing by FTX, the world's third-largest crypto exchange. Now, Crypto.com, which is in the top 10, is also faltering. Cryptocurrency transactions have no borders. Although these exchanges are based overseas, domestic investors who traded on FTX risk losing all their deposits. Investors who purchased coins issued by Crypto.com will also likely suffer significant losses.
The apparent cause of the ongoing crisis is the lack of liquidity. However, the underlying reason is in fact due to these exchanges' illegal and irregular operations. According to overseas media reports, FTX withdrew clients' money, invested more than $10 billion into an insolvent affiliate and lost nearly $2 billion. As well, more than $500 million worth of cryptocurrencies was said to have been stolen from FTX in a cyberattack, which occurred around the time of the bankruptcy filing.
If all these prove true, they are tantamount to embezzlement, breach of trust, window dressing and financial fraud. Cryptocurrency markets are based on the trust that exists among participants. As seen in the domestic crypto fiasco caused by the Terra-Luna ecosystem controversy in May, if exchanges lose investor confidence, not only does the currency value plunge, but also the market itself is shaken. Numerous warnings have been issued about the risk of investing in cryptocurrencies. Investors should be solely responsible for their losses.
The exchanges that caused recent controversies are headquartered overseas. Therefore, Korean investors cannot complain to the government about the losses they have incurred. Nor are there ways to compensate for the losses according to domestic procedures. However, the government and financial authorities should not just sit and watch the situation because the state is responsible for protecting people from risky and fraudulent financial instruments.
According to FTX's site traffic, by country from August to October, Korea accounted for 6.01 percent of the total users. The authorities must accurately check the Korean victims and their losses. The regulator also ought to ensure the stable operation of the domestic cryptocurrency market. Officials can start by checking whether the exchanges have accumulated enough reserves to prepare for investors' mass withdrawal of funds.
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