Important Information for Investors: South Korea’s Cryptocurrency Regulations
South Korea is implementing new measures to clamp down on illegal activities in the cryptocurrency realm. To bolster security, crypto exchanges will be required to store 80% of customer deposits in cold wallets and manage user deposits through banks. The aim of these regulations is to safeguard consumers’ interests and ensure the security of their cryptocurrency assets.
In a significant development, South Korea’s Financial Services Commission announced on February 7th the enforcement of the Virtual Asset User Protection Act, which will come into effect on July 19th. The upcoming regulations, slated to begin in the second half of the year, will prohibit market manipulation, illegal trading, and the use of undisclosed information about virtual assets. Those found guilty of making unfair profits exceeding 5 billion won could potentially face a life sentence.
Wrongdoers will face severe penalties, including imprisonment for more than a year or hefty fines ranging from three to five times the illicit gains. For unjust profits surpassing 5 billion won, the stakes are even higher, with the possibility of a life sentence and fines twice the amount.
To ensure the safety of assets, stricter measures have been proposed for crypto exchange owners. They will be required to store a minimum of 80% of customer deposits in cold wallets, which offer enhanced security against cyber threats. These wallets, which are not consistently connected to the internet, provide an additional layer of protection.
Furthermore, crypto exchange proprietors must manage user deposits through banks, creating a secure environment for buying and selling virtual assets. Additionally, businesses must subscribe to insurance policies to compensate for potential losses resulting from events such as hacking or computer failures. If insurance is not obtained, the firm may be subject to a deduction with a compensation limit of more than 5% of the current value of the cryptocurrency.
These regulations apply to all businesses categorized as crypto exchanges. The Financial Services Commission has the authority to take various measures, including suspending business operations, issuing correction orders, filing complaints, or notifying investigative agencies in cases of non-compliance.
These proposed regulations highlight South Korea’s commitment to striking a delicate balance between promoting innovation in the digital asset space and ensuring user safety. The measures not only protect consumers’ interests but also provide assurance regarding the security of their cryptocurrency assets within exchanges and crypto firms.