The SUI token, the native cryptocurrency of the Sui blockchain platform, has experienced a sharp decline in its price after being accused of supply manipulation by South Korean authorities. The Sui Foundation has denied any wrongdoing and defended its transparency and compliance.
SUI Token Drops to Record Low Amid Allegations
The SUI token has been under pressure since Oct. 16, when it fell from $0.41 to $0.37 in two days, marking a 7% drop according to data from CoinGecko. The token reached an all-time low of $0.367 on Oct. 18, before recovering slightly to $0.381 at the time of writing. The token has a market capitalization of $1.2 billion and a 24-hour trading volume of $54 million.
The price drop coincided with reports from South Korean media outlets that the Financial Supervisory Service (FSS) was planning to launch an investigation into the distribution of the SUI token. The reports cited allegations made by Representative Min Byeong-deok, a lawmaker from the Democratic Party of Korea, who claimed that the Sui Foundation had manipulated the supply of the token to pay itself increased staking rewards.
Rep. Min said that the Sui Foundation had staked coins that should have remained in the non-circulating supply and sold them to increase the circulating supply. He also said that the foundation had lied about the amount in circulation, which resulted in the price plummeting by more than 67% in five months since listing. He criticized the Digital Asset Exchange Joint Consultative Body (DAXA), a self-regulatory organization of crypto exchanges in South Korea, for not raising the issue and urged the FSS to intervene.
Sui Foundation Rejects Claims as ‘Unfounded and Materially False’
The Sui Foundation, the organization behind the layer-1 blockchain platform Sui, responded to the allegations on Oct. 18 via its official X account (formerly known as Twitter). The foundation said that it wanted to address some inaccuracies that had been reported and that the statements surrounding the supply of SUI tokens were unfounded and materially false.
The foundation said that it had never sold any SUI tokens after the initial Community Access Program (CAP) distributions, which were conducted in June 2022. It also said that the circulating supply schedule displayed on its public website and available through its public API endpoints was accurate. It added that it had been and remained committed to cooperating with DAXA and its member exchanges in the spirit of full compliance and transparency.
The foundation also shared a link to a blog post published on Oct. 18, where it explained in detail how the SUI token supply works and how it is calculated. It said that the total supply of SUI tokens was fixed at 10 billion and that there were four categories of supply: circulating supply, staking supply, locked supply, and reserved supply. It said that only the circulating supply and staking supply were relevant for determining the market capitalization and that both were publicly verifiable on its website and API.
The foundation also clarified that it did not receive any interest or rewards from staking its own tokens, as Rep. Min had alleged. It said that it only received a fixed amount of tokens per month as part of its operational budget, which was approved by the community through governance proposals. It said that these tokens were either used for operational expenses or locked for future use.
The foundation concluded by saying that it welcomed any inquiry from regulators and that it was confident that its practices were compliant with all applicable laws and regulations.
South Korea Tightens Crypto Regulations Amid Market Turmoil
The allegations against the Sui Foundation come at a time when South Korea is tightening its crypto regulations amid market turmoil and consumer complaints. The country has recently implemented new rules that require crypto exchanges to register with the FSS and obtain information security certification from the Korea Internet and Security Agency (KISA) by Sept. 24, 2023. The rules also require exchanges to partner with banks to offer real-name accounts for their users and report any suspicious transactions to the authorities.
However, only four exchanges out of more than 60 have met the requirements so far: Upbit, Bithumb, Coinone, and Korbit. The rest are either facing closure or operating with limited services, such as only allowing crypto-to-crypto trading or delisting some coins. The situation has caused uncertainty and frustration among crypto investors, who have faced difficulties in accessing their funds or transferring them to other platforms.
The FSS has also announced that it will introduce a comprehensive set of crypto legislation by Jan. 2024, which will cover various aspects of the industry, such as taxation, consumer protection, anti-money laundering, and market supervision. The FSS said that it will consult with relevant stakeholders and experts to draft the legislation and that it will aim to balance innovation and regulation.
The Sui Foundation is not the first crypto project to face regulatory scrutiny in South Korea. In May 2022, the Terra Money ecosystem, which is backed by prominent entrepreneur Do Kwon, collapsed after being accused of violating the Foreign Exchange Transactions Act by issuing stablecoins pegged to foreign currencies without authorization. The incident led to a massive sell-off of the LUNA token and a loss of trust among investors.
