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Crypto

South Korea’s New Crypto Investor Protection Law Goes Into Effect

Rubmar Garcia
by Rubmar Garcia
1 year ago
·
Posted in Crypto News
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

This Friday, the first South Korean crypto regulatory framework has gone into effect after the one-year preparation period. The new law requires firms in the country to comply with stricter requirements to protect investors and their assets.

Related Reading: $235 Million Crypto Theft from WazirX Was ‘Perpetrated’ By North Korean Hackers, Report Reveals

South Korea’s New Crypto Regulatory Framework

On July 18, 2023, South Korea’s Financial Services Commission (FSC) passed the Virtual Asset User Protection Act to reflect “key provisions” proposed under 19 pre-existing legislative crypto bills pending at the National Assembly.

The new Crypto Act was enacted in response to the growing industry and the need to set a clear and comprehensive regulatory framework. Previously, the industry was regulated through the existing Act on Reporting and Using Specified Financial Transaction Information.

This law was modified in 2021 to incorporate some requirements for Virtual Asset Service Providers (VASPs), including registration with the financial authority as a requisite for crypto firms. Nonetheless, this act was considered unfit to properly regulate the sector and protect investors, as seen with the Terra-LUNA and FTX collapse in 2022.

It was continuously pointed out that the regulatory framework centered on anti-money laundering was not adequate for authorities to actively respond to various types of unfair trading activities, such as price manipulation, and for guaranteeing safe protection of users’ assets.

Following the approval of the new regulatory framework, crypto firms in South Korea had one year to prepare for the Act’s implementation while the financial authorities refined details. The regulator stated to have worked towards a seamless law implementation.

According to the press release, The FSC prepared subordinate regulations “specifying detailed provisions delegated by the law.” South Korea’s Financial Supervisory Service (FSS) also provided a roadmap for crypto firms and implemented a pilot test to “check the readiness of both the regulators and VASPs.”

crypto

FSC details some of the preparations for the new law implementations. Source: Financial Services Commission

Virtual Asset User Protection Act Goes Into Effect

On July 19, the Virtual Asset User Protection Act was implemented in South Korea. The act aims to protect investors from various offenses and safeguard their assets.

The new crypto regulatory framework includes provisions to protect users’ deposits, regulate unfair trading practices, and authorize financial regulators to supervise the industry.

Crypto firms are now required to keep customer deposits at banks and pay fees to their customers as interest payments on their deposits. The companies must also separate their assets from clients’ and “have in their custody the types and volume of virtual assets their customers have.”

Since this Friday, VASPs must be insured “against liabilities resulting from hacking or other network malfunctioning accidents” or have a reserve fund to cover these incidents.

Moreover, crypto companies should have a surveillance system for suspicious transactions and report any irregular trading activity to the FSS. Financial regulators, including the FSS and the FSC, now have the authority to supervise and inspect VASPs.

Crypto

Financial authorities are now allowed to investigate and bring sanctions to VASPs. Source: Financial Services Commission

South Korea’s financial authorities can also impose sanctions on those guilty of engaging in unfair trading activities, which could result in criminal punishments or penalty surcharges.

Ultimately, the FSC expects the new crypto regulatory framework will “establish a foundation to provide safe protection for users” and “a sound order in the virtual asset market” in the country.

Related Reading: BlockFi To Reimburse Customers Soon via Coinbase, Users Make Disturbing Claims

crypto, BTC, BTCUSDT

Bitcoin (BTC) is trading at $64,362 in the three-day chart. Source: BTCUSDT on TradingView
Featured Image from Unsplash.com, Chart from TradingView.com
Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.
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Rubmar Garcia

Rubmar Garcia

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Rubmar is a crypto enthusiast who likes learning and improving constantly. She enjoys reporting on the latest news and developments in the crypto industry. Rubmar also enjoys scrapbooking, crafting, simulation games, and watching football.

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