South Korea Implements Virtual Asset User Protection Act to Strengthen Cryptocurrency Regulation
South Korea’s approach to regulating the cryptocurrency industry has become increasingly proactive. On February 7th, the Financial Services Commission of South Korea announced that it had issued a legislative notice regarding the Enforcement of the Virtual Asset User Protection Act, which will come into effect on July 19th.
Under the new regulations, which will be implemented in the second half of this year, market manipulation, illegal trading, and the use of undisclosed important information related to virtual assets will be completely prohibited. If the authorities determine that the unfair profits from illegal trading exceed 5 billion won, the law can impose a maximum sentence of life imprisonment.
Those who violate the law will face serious criminal punishment, including imprisonment for more than one year. If not imprisoned, the criminals will be subject to hefty fines ranging from three to five times the illegal profits. However, if the amount of unfair profits is particularly large, such as exceeding 5 billion won, a maximum sentence of life imprisonment can be imposed, along with a fine equal to twice the amount of unfair profits.
Furthermore, all deposits and withdrawals must be conducted through banks. The proposed regulations require business owners to store at least 80% of customers’ deposits in cold wallets. Cold wallets are not continuously connected to the internet, making them more resistant to cyber threats and providing enhanced security for users’ digital assets.
In addition, business owners of cryptocurrency exchanges must manage deposits made by users for the purpose of buying and selling virtual assets through banks. To compensate for potential losses resulting from incidents such as hacking or computer failures, firms are also required to have insurance policies. If a firm does not have insurance, it may face a deduction with a compensation limit of more than 5% of the current value of the cryptocurrency.
All businesses falling under this category are obligated to comply with the Virtual Asset User Protection Act. In the event of a violation, the Financial Services Commission may take various measures, including suspending business operations, ordering corrective actions, filing a complaint, or notifying law enforcement agencies against the owners.
These proposed regulations demonstrate South Korea’s commitment to balancing innovation in the digital asset space with user safety. They aim to protect consumers’ interests and safeguard their cryptocurrency assets by providing assurance from exchanges and cryptocurrency firms.
Tags: Crypto Regulations