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Following the Fall of LUNA, Singapore Watchdog To Lay Down Stablecoin Regulation

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Following the fall of Terra, LUNA, and the entire Do Kwon ecosystem, countries are pushing regulations on crypto and stablecoins.

The main financial watchdog for a city-state, the Monetary Authority of Singapore (MAS), evaluates the benefits of a regulatory framework for stablecoins.

The KYC concerns that are the focus of current regulations do not take into account the unique dangers that stablecoins are subject to.

Regulatory head of Singapore illustrated the high risks that followed LUNA’s fall

On Monday, the MAS official homepage posted a written statement from Tharman Shanmugaratnam, the regulator’s chief, in response to a query from a Singaporean lawmaker.

The inquiry asked whether there was information on how exposed Singaporeans were to the recent decline in the value of the TerraUSD Classic (USTC) stablecoin and the Luna Classic (LUNC) token and if the MAS was actively thinking about ways to address future crises of this nature.

Shanmugaratnam recognized that the Terra collapse serves as an example of the severe dangers associated with investing in cryptocurrencies, but he emphasized that the unrest has not adversely impacted the economy or the mainline financial system.

The majority of the official response described MAS’s existing plans for stablecoins.

The current framework, in which stablecoins, along with other cryptocurrencies, are being deemed digital payment tokens (DPTs), doesn’t address the unique hazards, according to him, thus MAS is actively examining its approach to the regulation of stablecoins.

As a result, MAS “is evaluating the advantages of a regulatory system” particular to the features of stablecoins.

It will concentrate on issues including controlling reserve requirements and peg stability. As stated in the answer, MAS plans to consult the public in the following months regarding the guidelines.

The ties between LUNA’s TerraForm Labs, Three Arrows Capital (a cryptocurrency hedge fund currently facing bankruptcy procedures), and Singaporean crypto regulation were officially denied on July 19 by Ravi Menon, the managing director of MAS.

Menon also stressed the need for the regulatory attention to be shifted away from KYC/AML and onto the more complex threats presented by cryptocurrencies in his address.

Terra Community Makes a Proposal for the Distribution Method for 0.5% Emergency LUNA Allocation

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Cephii1, a Terra community member, proposes on behalf of the Terra community members. The suggestion is for a mechanism of distributing the 0.5 percent emergency LUNA allocation.

According to the user, the suggestion was made on behalf of community members, validators, TFL, and others. The initiative also aims to improve the Ecosystem’s Revival Plan 2.

The rising discussion over how to distribute the 0.5 percent emergency LUNA properly opened the way for the plan to grant a 10% LUNA supply to developers. However, the LUNA team did not specify how the emergency fund would be allocated.

The Terra community lays down the proposal

The user established the criteria for who is qualified to receive the emergency fund after gathering recommendations from community members:

  • Projects in LUNA Classic that achieved product-market fit and TVL.
  • Projects that began on LUNA Classic and achieved product-market fit but have yet to produce verifiable results TVL.
  • Projects in the pre-and post-launch phases that have not yet established product-market fit (pre-PMF)

The plan first focused on smaller initiatives, outlining the minimum amount needed for minor projects as well as the number of projects that should be funded.

According to the poll, the projects would cost $100-300k for six months of runway. In addition, the community chose over 50 projects that would be eligible for it.

The concept called for providing $100,000 to $300,000 in LUNA to eligible pre-PMF teams. The eligibility and allocations would be decided by a council of long-standing Terra community members, including Karma, Panterra0x, Cephii, Seb, and GJ.

In addition, the user proposed that the projects Coinhall, Terrascope, Setten, SCV, Terra One, Random Earth, Knowhere, Leap Wallet, and TFM receive an additional $500k-$1M in LUNA. This is due to the added value of infrastructure and tooling.

To sum up the emergency fund’s total of 5 million LUNA:

  • 2.5 million should be allocated among projects that debuted on Terra Classic and established product-market fit, as well as TVL (PMF and TVL).
  • One million LUNA should be awarded to ventures that debuted on Terra Classic and achieved product-market fit but no demonstrable TVL (PMF but any TVL).
  • 1.5 million LUNA should be spent on pre-and post-launch measures that failed to create product-market fit (pre-PMF).

Fakesters use LUNA 2.0 airdrops to target users

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Scammers are giving fresh Luna 2.0 to cryptocurrency CEOs and influencers’ addresses, according to PeckShield, a major blockchain security business, including Vitalik Buterin’s, Justin Sun’s, and the 3AC Foundation’s wallets.

According to the Ethereum block explorer, the Wrapped LUNA 2.0 contract address issued millions of the new tokens and delivered them to the official addresses of Vitalik Buterin, Three Arrows Capital, Justin Sun, and other influencers. Scammers were sending the wrapped tokens to a real Terra deployer as well as airdropping them to the listed addresses, according to PeckShield.

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Users were led to believe that the “Wrapped Luna 2.0” address was a legitimate Terra 2.0 token deployer, and that they must transfer their previous Luna tokens to those smart contract addresses by the exploiters.

Payments to well-known wallets, such as Justin Sun’s tagged addresses and the ENS address vitalik.eth, give the contract page credibility and attract regular users who will sell their worthless tokens for a new version.

Yet another LUNA scam

HODLers with the token (including staking derivatives) and fewer than 500k aUST (UST placed in Anchor) during the pre-attack snapshot period are eligible for the airdrop. The airdrop was also open to users who had LUNA and UST at the time of the post-attack snapshot.

Many decentralised platforms and exchanges previously resisted the upgrade either to regulatory worries or user reluctance to trade their old Luna tokens for the new one.

Terra’s co-founder, Do Kwon, proposed to “restart” the project without the UST stablecoin and a new token distribution when the UST and Terra tokens failed. Despite the fact that voting on Terra’s governance platform was successful, not all users are happy with Do Kwon’s decision and say that developers should focus on revitalising the current coin rather than creating a new one.

While some exchanges have refused to support the new Terra blockchain, many others have agreed to do so.

Exchanges Show Support in Assisting LUNA’s Revival by Listing the New LUNA 2.0

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For the launch of LUNA 2.0, Huobi, Binance, FTX, Bitrue, HitBTC, and Bybit cryptocurrency exchanges, have expressed interest in working with the Terra team to launch their new chain without an algorithmic stablecoin.

Binance had previously halted trades after validators paused the blockchain, making trades impossible, but in response to Terra’s statement, announced in a tweet, “The Terra community just approved a vote to ‘Rebirth Terra Network.’

” On the recovery plan, we’re collaborating closely with the Terra team in order to provide the best possible service to impacted Binance users. “Stay tuned for more information.” On May 25, 2022, at 2 p.m. UTC, Bybit will cease LUNA and UST withdrawals, renaming LUNA as LUNC and UST as USTC on May 26, 2022, and Bitrue will commence Luna V2 trading on May 27, 2-22.

The exchanges will assist in the LUNA 2.0 airdrop

Terra’s algorithmic stablecoin UST lost its dollar peg earlier this month in a well-documented disaster. LUNA, its companion coin, crashed at the same time. In the aftermath of the Terra crash, founder Do Kwon proposed creating a new blockchain with the previous token rebranded as Classic and a new token, running on a new blockchain without an algorithmic stablecoin. On the Terra Classic blockchain, the original UST will survive.

A community pool regulated by staked LUNA classic tokens will receive 30% of the new tokens as an airdrop. At the same time, 35% will go to “pre-attack holders,” 10% to “pre-attack UST holders,” 10% to “post-attack holders,” and 10% to “post-attack UST holders,” and 15% to “post-attack UST holders.” Terra Classic block 7544910 will be used for a snapshot, whereas block 7790000 will be used for a post-attack snapshot. The airdrop will be co-hosted by Bybit and Bitrue.

Kwon had even encouraged developers to highlight the new blockchain’s support.

Luna Foundation Guard Funds Were Requested to Be Frozen by the South Korean Police

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Police in South Korea has sent warnings to cryptocurrency exchanges, requesting the freezing of funds linked to the Luna Foundation Guard.

On Monday, Korean authorities sent a request to the country’s largest cryptocurrency exchanges, urging that funds not be transferred. The Luna Foundation Guard was specifically asked by the Seoul Metropolitan Police Agency not to take any action. Authorities claim they have acquired evidence linking the group to embezzlement.

The Luna/Terra algorithmic stablecoin debacle earlier this month devastated investor portfolios overnight, with the coin’s value plummeting by nearly 99 percent. This request, on the other hand, is neither a demand nor legally enforceable. Each individual can choose how they wish to answer, but no one knows how they will react.

Luna Foundation Guard might be in trouble

Several large Korean investors have investigated and sued Do Kwon, the CEO of Terraform Labs, following the collapse of the TerraUSD (UST) stablecoin. As a result of this, the “Grim Reaper,” a Korean Financial and Securities Crime Joint Investigation Team, was revived.

Korean lawmakers have met with executives from Upbit, Bithumb, Coinone, Korbit, and Gopax, among other sites. Because the leaders of these exchanges are not obligated to comply, this meeting is most likely a ploy to put pressure on them.

“We will review the exchange’s investor safety procedures,” Yoon Chang-Hyeon, chairman of the People’s Strength Virtual Assets Special Committee, wrote on Facebook, according to Newspim.

According to the publication, it is reasonable to assume that exchange representatives will be held accountable in some way for the losses suffered by investors as a result of the Terra (LUNA) price drop. The Korean National Assembly, according to Newspim, is making moves to limit punishment in this sector.

Coinone has suspended LUNA trading as of May 11th, and Binance has also suspended certain spot trading.

The request to crypto exchanges and the Do Kwon probe are unrelated, despite the fact that this official report is part of a broader story.

Novogratz Breaks His Silence, Speaks About His Tattoo Following the LUNA Collapse

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Mike Novogratz, the billionaire founder of crypto asset management business Galaxy Digital, informed his followers that his Terra (LUNA)-inspired tattoo will serve as a reminder to be humble in the venture capital sector.

Following the recent LUNA/TerraUSD crash, Novogratz wrote an open letter to his followers on Wednesday, saying, “My tattoo will be a continuous reminder that venture investing takes humility.”

Novogratz originally displayed his wolf-themed tattoo to his 461,000 Twitter followers on January 5 in a passionate statement of his support for the now-defunct Terra ecosystem.

Novogratz believes that the crypto business is stronger than ever

Last week, Terra’s TerraUSD (UST) stablecoin failed, driving the price of its sister-token LUNA from $60 to $0 in less than 72 hours. The crash cost the cryptocurrency ecosystem almost $40 billion.

“When money is lost in such a sudden fashion, people expect explanations,” Novogratz wrote in the letter.

Despite last week’s “heart-wrenching” market chaos, he believes the crypto business is stronger than ever and will not disappear anytime soon.

“This does not mean the crypto market will bottom and head straight back up. It will take restructuring, a redemption cycle, consolidation and renewed confidence in crypto.”

According to a May 13 statement from Galaxy Digital, the company expects to lose $300 million in net comprehensive income as of May 11, reducing the partners’ capital to $2.2 billion, down 12% from March 31.

Pantera Capital, one of Terraform Labs’ early investors, announced on Thursday that it had sold out around 80% of its LUNA investment well before the TerraUSD collapse. Pantera partner Paul Veradittakit claims that the firm was able to turn $1.7 million into $170 million.

Crypto-themed tattoos have gained in popularity significantly in recent years, with crypto tattoo-related Google searches increasing by 222 percent in 2021. According to Crypto Head, more than 900 people have tattoos of the Bitcoin (BTC) “B,” while Dogecoin (DOGE) and Ether (ETH) tattoos are also on the rise.

“Burn LUNA” Gains Momentum As Do Kwon Proposes A New Terra 2.0 Chain

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“Burn LUNA” hashtags continue to gather steam on Twitter even as Terraform Labs creator Do Kwon made his intention clear to go ahead with the on-chain governance proposal despite the majority voting ‘No’ in the online poll.

On 16th May, Kwon proposed the hard fork that would split into two chains: Terra and Terra Classic. The new, non-classic chain would abandon the failing UST stablecoin and instead focus on decentralized finance (DeFi) applications building on Terra, as TronWeekly reported. 

Kwon posted a call to action as part of yesterday’s announcement: “We encourage Terra developers to signal support [and] commit to building on the fork on public channels,” he wrote.

Over a dozen validators voted in support of the fork of Terra that focuses on development rather than its stablecoin. However, results from the preliminary poll indicated that many community members were against the idea.

More than 90% of 6,921 voters on a previously held online poll have voted down the change, with the most popular responses calling for “no fork.”

Fork Or Burn. What Do Experts Say?

The most trending crypto hashtags called for burning LUNA as many in the community felt the token can be salvaged by buying up the circulating supply and then burning it down.

Leading fund managers were skeptical saying that Terra’s senior team would push for forking the blockchain irrespective of the community’s sentiment toward the project. Doo Wan Nam, founder of crypto fund Stable Node said,

“It’s a dilemma for Kwon and Terra’s team as they can technically override the community’s consensus by either forking regardless of the decision or using their staked Luna [to prevent the network from being manipulated] to change the voting to support.”

“This will be received very poorly by not only the Terra community but the wider crypto community. However, Do and his team might not have much choice but to do it to better reflect his vision of the Terra ecosystem,” Doo added.

On the other hand, Terra’s woes refuse to end as reports emerged of possible legal action by a South Korean law firm. LKB & Partners will reportedly file the case against Kwon, a Korean national, on behalf of ordinary investors to the Seoul Metropolitan Police Agency, according to a local news outlet.

Terraform Legal Team Quits – Is It Over for LUNA?

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After a supposed change in job status for several employees of Terraform Labs’ legal team, the ongoing saga with Terraform Labs, the blockchain developer behind Terra (LUNA), took a turn.

Terraform Labs’ internal legal staff resigned shortly after Terra’s algorithmic stablecoin imploded, causing a massive blow to the broader crypto markets.

Terraform Lab’s general lawyer Marc Goldich, chief litigation, and regulatory counsel Noah Axler, and chief corporate counsel Lawrence Florio all left the blockchain business in May 2022, according to their LinkedIn profiles. Axler and Florio joined Terraform Labs in January 2022, while Goldich started in August 2021.

A major hit for Terraform and the entire ecosystem

“Terraform Labs has had a challenging week, and a small number of staff members have resigned recently,” a company spokesperson said.

“The vast majority of team members are still dedicated to fulfilling the project’s objectives. Terra is more than UST, with a strong community and a well-defined rebuilding strategy. The Terra spokesman stated, “Our current focus is on implementing our plan to restore the Terra ecosystem.”

Do Kwon, a prominent co-founder of Terra has made various proposals for Terra’s future in the days following the collapse of UST and LUNA.

The most recent plan, known as “Terra Ecosystem Revival Plan 2,” advocates for the permanent destruction of UST and the forking (splitting) of LUNA to LUNA Classic (LUNC) and the new coin to be called LUNA.

Previous UST and LUNA investors who lost a significant investment in the coin, as well as current LUNA holders, would be airdropped 1 billion new LUNA tokens as part of the plan.

Many crypto users, possibly experiencing big losses, advocated for legal action against Kwon even before some of Terraform Labs’ lawyers reportedly terminated connections with the firm. Others claimed that Goldich, Axler, and Florio’s possible resignation was due to a moral issue while defending Terraform Labs or concerns about where their next salary would come from.

The legal staff would not be the first in the crypto world to flee a sinking ship if their departure was related to concerns about the LUNA and UST crashes. SushiSwap’s chief technology officer, Joseph Delong, resigned in December 2021, claiming “chaos” in the decentralized exchange’s operations.

Terra Founder’s Call Of Action: Proposes A New Community-Owned Chain For LUNA

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Determined to pull the Terra ecosystem out of its current plight, founder Do Kwon laid out a new “Revival Plan” asking developers to support & commit to building on the fork without the algorithmic stablecoin. including LUNA token.

Calling UST peg failure as a “chance to rise up anew from the ashes”, Kwon put a brave front saying that the ecosystem and its community deserve another chance.

“It would be devastating for broader crypto adoption and advancement if we remain in entropy amidst opposing views, and as such, I propose the following to chart the path forward for our ecosystem,” he tweeted.

In the follow-up thread, the creator proposed forking Terra into a new chain named “Terra” [token Luna – LUNA], and the old chain would be called “Terra Classic” [token Luna Classic – [LUNC]. “Both chains will coexist”, he added.

“New LUNA will be airdropped to LUNC stakers, holders, residual UST holders, and essential app developers.”

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Terra Founder's Call Of Action: Proposes A New Community-Owned Chain For LUNA 3

Kwon also revealed that the foundation behind the ecosystem-TFL’s wallet will be removed from the airdrop, making the project a fully community-owned chain.

Besides that, TFL will be initiating a governance proposal, with Kwon promising that the voting would start on May 18. According to the timeline published in the revival plan, the new network launch could come as soon as May 27.

Terra’s Fork Generated Mixed reactions

Crypto Community’s Sentiment appeared to be mixed toward the proposal.

While some cheered, others felt instead of airdropping new LUNA tokens to UST holders, it would be good to deploy TFL funds to provide relief to small UST holders.

One of them even asked to ditch the hard fork and opt for the buyback and burn course. Interestingly a few days back, Binance CEO CZ was the one to suggest the burn option to reduce supply and “not fork at an old date”.

Shortly after the announcement, Terra’s LUNA has lost nearly a quarter of its value in the past 24 hours.

The token has shed more than 99% since April’s peak of nearly $120. The massive drop was due to excess LUNA circulation last week to prevent the collapse of terraUSD (UST).

SBF: “The LUNA UST Mechanism Wasn’t Misrepresented—It Was Very Transparent”

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FTX CEO Sam Bankman-Fried a.k.a SBF stood boldly behind Terra’s co-founder Do Kwon and has shared his views on one of the worst debacles in the crypto industry. Supporting the beleaguered founder, SBF sought to give his piece of mind in one of the most talked-about issues- the LUNA/UST mechanism which has come under intense criticism.

In his Twitter thread, SBF said the LUNA/UST was very transparent and not distorted as widely viewed. “Do Kwon obviously stood by it, morally and in terms of press, long after he should have backed off,” the tweet read.

Kwon didn’t claim that UST was backed 1:1 by USD. He claimed, accurately, that it was backed by a bunch of volatile assets. It was very publicly clear that those assets might go down, and the rest followed. Again–I don’t want to condone the behavior. But it’s different.

Kwon who is currently facing mounting criticism over his stablecoin fiasco was on one occasion labeled crypto’s Elizabeth Holmes drawing similarities to her defrauding investors in the Infamous Theranos Scandal that rocked the US healthcare industry.

According to SBF, Luna was driven by mass enthusiasm, excitement, and over-the-top marketing and meme gimmicks that made people believe in something which was going to falter according to the publicly available information.

“That marketing was probably bad. But it wasn’t the *same* type of bad as Theranos,” he said.

SBF: “Most Bad Investments Aren’t Ponzi Schemes”

The FTX founder tried to dispel myths about investments that yield losses by saying “most bad investments aren’t Ponzi schemes. Some are fraud, some are bad luck, and some are somewhere in between.”

He reasoned this by citing instances of investments that have lost more than 50% of their value in 2022, including Cathie Wood’s ARKK Investment, AMC Entertainment, Netflix, and LUNA.

One can’t help but compare the stark contrast to Binance Changpeng Zhao’s reaction who slammed UST as “one over-leveraged ‘stable’ coin” and criticized the design flaw of its ecosystem. 

Following the meltdown, the world’s largest cryptocurrency exchange responded by halting the trading of Terraform Labs’ Terra [Luna] and TerraUSD [UST] tokens on its platform indefinitely.