Crypto and the Law: While regulators clamor, Do Kwon proposes LUNA hard fork

By I-HODL | A Crypto Journey | 17 May 2022


Regulators around the world are evaluating the aftermath of Terra's UST/LUNA and weighing in with renewed calls for greater supervision. And even as at least one South Korean politician calls for a hearing on the crisis, Terra creator, Do Kwon, is back with a proposal for a hard fork so that a new LUNA can continue without its reliance on UST while the original project continues as LUNA Classic. Meanwhile, there's talk that China's ban on cryptocurrencies didn't  exactly stop the country from growing as the world's second largest Bitcoin mining hub. There's a lot to discuss, my friends, let's get to it.

Do you still hold LUNA or UST?

Quick confession, friends, I do. Well, I hold LUNA. All told, my holdings today amount to less than $10, and declining. Some were purchased before the crash, and a bit after. And I know you're probably thinking I'm a knucklehead, maybe I absolutely am, but I've held on to it just in case as I followed developments in the Luna space, all right?

Regulators renew call for greater supervision of crypto and stablecoins

Have you ever been a part of a gathering, like in a classroom, where everyone is talking all at once, and then a teacher enters the room and clears his or her throat? Now it can't just be any teacher attempting this, right, it must be a teacher who's really respected, maybe even feared. And, I mean, every school has that one teacher, right?

So the teacher cleared his or her throat, do you remember the eerie, uncomfortable stillness that followed? Do you remember how everyone kinda fidgeted? Well, it feels like we're building up to that moment right now, doesn't it? Because while the world is clamoring and regulators are all throwing in their two cents, the US regulators are still just kinda standing back, arms folded, observing, right? They haven't really cleared their throats and said, here's what we are going to do.

In fact, though the rest of the world were a-dither after the UST-LUNA crash, according to reports, US Treasury Secretary Janet Yellen was not. In a nutshell, and totally paraphrasing here, Yellen has said that stablecoins are not at a scale where a de-pegging incident could present a threat to the country's financial stability. Here's a very informative video which can lend some insight into the US' current position on stablecoins.

The US Congressional Research Service has also published a report on the UST-LUNA crash which notes that the most recent event is not the first time an algorithmic stablecoin has displayed run-like behavior.

The Iron Titanium (TITAN) token faced a run-like scenario in June 2021 and saw its price crash to near zero within one day.

I mean, guys, when I read this, I was like, oh yeah, that time when even Mark Cuban got rugged, right? I had completely forgotten about that. So many things happen in the world of crypto, honestly.

Thing is though, while this may be the trending topic today, this week, this month, I'm just saying y'all, don't sleep. The regulators, the regulators regulators, if you know what I'm saying, are watching. If occurrences like these continue though, and God forbid they do, I'm guessing they will step in. And I'm wondering what the stillness that follows will be like after.

Anyways, in the meantime, it's an open classroom, and everyone's got something to say.

Members of China's state media are finding vindication for their country's decision to ban cryptocurrencies in the recent UST/LUNA crash, maintaining that the incident "proves the timely and effective action of our country’s regulators", while financial regulators in other parts of the world are calling for greater supervision of crypto assets and stablecoins. 

Speaking recently at the National College of Ireland, Fabio Panetta, a member of the executive board of the European Central Bank (ECB), mentioned plans to possibly issue a digital euro as part of an exercise to ensure that public money keeps its role as a monetary anchor in the digital era. 

Of course, Panetta, an Italian economist and former Director General of the Bank of Italy, did not pass up the opportunity to comment on cryptocurrencies and their dependence on public money as an anchor and also the risks associated with stablecoins.

Commenting on stablecoins, he said:

Stablecoins do not benefit from deposit insurance, nor do they have access to central bank standing facilities. They are therefore vulnerable to runs, as we have just seen with the crash of another stablecoin – TerraUSD.

During a conference at the Bank of France on Monday, another ECB policymaker, Francois Villeroy de Galhau, also reportedly said, "Crypto-assets could disrupt the international financial system if they are not regulated, overseen and inter-operable in a consistent and appropriate manner across jurisdictions."

Over in the UK, regulators are proceeding with plans to regulate and legalize stablecoins, though algorithmic stablecoins may not be on the table just yet. And, of course, given recent developments, it may be some time before algorithmic stablecoins get another shot at passing the smell test. 

South Korean politician calls for hearing on UST/ LUNA crash

South Korean developer, Do Kwon, creator of the Terra project, may be undaunted by the recent UST/LUNA crash, and may be seeking to whip up support with his rallying cry on Twitter under the hashtag TerraIsMoreThanUST. He may even be proposing a revival of the LUNA coin without its UST peg, and that's all well and good, but there's at least one parliamentary politician who feels like there needs to be a bit more accountability and a bit more sustained discussion about what happened and what is being done to address the cries of LUNA holders, many of whom lost everything following the project's crash. Like this guy.

According to reports, member of South Korea's ruling People Power Party Yun Chang-Hyun, is calling for a parliamentary hearing on the cause of the  LUNA/UST crash, the behavior of exchanges during the crash, and measures to protect investors, and he is insisting that Do Kwon as well as South Korean cryptocurrency exchange officials attend the hearing. The call was reportedly made today during a plenary meeting of the National Assembly's Political Affairs Committee.  Among the exchanges mentioned were Coinone, Korbit, Gopax, and Upbit. 

"Upbit, which was the last to stop trading even after seeing the crash, is the No. 1 company with an 80% share. In just those three days, it earned close to 10 billion won [$7.8 million] in commission income," Chang-hyun is reported to have said.

And as a sidenote, my friends, I'm not sure that Do Kwon's rallying cry for a new LUNA is going very well, not when investors are insisting on a burn.

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Bitcoin Miners Risk it all in China

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Listen friends, I thought I was daring. Honestly, I did. That is until one day some friends took me up to a baby hill and suggested I should rappel over the edge, completely supported and everything. I'm ashamed to confess it, but I balked y'all. I squeezed my eyes shut and I was like, nuh-uh. I'll walk down the established path the way normal folk do, and I'll meet you guys on the other side, and you'd better not be coming down at me like splat either. That's when I realized I wasn't as daring as I thought.

My biggest dare is buying a bit of cryptocurrency, and I'm thinking we can all agree that that's fairly risky, so I'm not a complete coward, all right? But I'm certainly not as daring as those guys over in China. Cuz I've heard reports that there are some miners over there who enjoy living on the wild side, and are taking some pretty big risks, continuing to mine in China even after the country's ban on cryptocurrencies and mining. 

According to the Cambridge Bitcoin Electricity Consumption Index, China, once the world's largest Bitcoin mining country, is now the world's second largest, hosting 21% of the world's total global Bitcoin hash rate. 

Closing Thoughts and Questions

Well, friends, what do you think will be the outcome of Do Kwon's proposed vote for a Luna hardfork on May 18th?

If you were a holder before the black swan event, will it be enough for you to get an air drop of a new token? Will that allay your fears and rebuild your confidence in the project and its team?

Like I said, I hold a bit of Luna, so its growth either way is beneficial to me, but I'm interested to know how investors feel about Do Kwon's plans.

There's also the speculation that only new investors are the ones clamoring for a burn while old investors will support the hardfork. Based on what I've seen on Twitter, at least some developers seem to support the idea of a hard fork. What do you think?

Do you think developers have a better chance with Do Kwon, on the existing Luna Classic, or do you think they will be better served leaving the Terra space altogether?

In my previous post, I mentioned that Fantom was inviting Luna developers, right? But I'll tell you this, it's not just Fantom. Quite a few competing protocols are seeking to woo Luna developers.  If you were a developer on Luna, what would you do?

Also, on the issue of regulations, do you think that the US will in time step in maybe a bit more than it has? And if they do, what do you think the implications of that will be?

There are so many defining moments in the crypto-verse, this evolving situation is one. As we continue to monitor developments as they unfold, I'll try to continue to bring updates to you as soon as I can.

On another note, we haven't spoken much about investing lately, have we? It's been so much news that our time runs out. Well, really quickly, and just between us pals, I'm exploring the idea of going in a bit more in the metaverse. Seems like a good time, doesn't it, with prices a bit low now? What do you think?

Remember, I'm not shilling anything. I'm not qualified to give financial or investing advice, and I'd hate to take on that responsibility. But I'm curious, are you investing in this bear market?  Given the recent volatility in prices, how confident do you feel about investing, and which projects interest you the most? I'm interested to know. 

Well, friends, until we meet again, please remember to be safe, all right? We'll chat soon.

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I-HODL
I-HODL

Navigating the ebbs and flows of crypto trading, and writing about it.


A Crypto Journey
A Crypto Journey

There's nothing more exhilarating than navigating the ebbs and flows of crypto trading. I have sea legs today, but truth be told, I've been lost at sea more than I care to remember and I have weathered quite a few storms as a trader. But the crypto-verse has also rewarded my resilience, and so after every dip, I get right back to sailing in pursuit of me buried treasure. I love this digital evolution and am proud to be a part of it. These are the tales of a crypto adventure! 

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