Financial Supervisory Service Conducts On-Site Inspections of TerraForm Labs-Linked Firms Including ChaiPay Amid 'Luna Incident'

[Image source=Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] In relation to the crash of the cryptocurrency Luna and TerraUSD (UST), the Financial Supervisory Service (FSS) will conduct on-site inspections of financial service providers linked to ChaiPay and others.

According to financial authorities on the 25th, the FSS plans to carry out on-site inspections of 2 to 3 companies, including ChaiPay, which provided financial services in connection with Terraform Labs, the issuer of Luna and UST.

Terraform Labs is headquartered overseas, and financial authorities do not have the legal authority to supervise or inspect the company. However, payment service providers linked to Terraform Labs fall under the jurisdiction of the FSS under the Electronic Financial Transactions Act, so the FSS intends to proceed with on-site inspections. If issues arise during the inspections, they may be escalated to formal examinations.

Earlier, when the price of UST, a stablecoin designed to be pegged to 1 dollar, plummeted, the price of its sister coin Luna also dropped, causing a major crash. Unlike other stablecoins backed by safe assets such as cash or government bonds, UST maintained its value through an algorithm linked to Luna. However, due to concerns about an economic downturn, the prices of Luna and UST fell, ultimately leading to the major crash.

On the 16th, ChaiHold Corporation, which operates ChaiPay, denied any connection, stating that "the partnership between the two companies ended in 2020."

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