South Korea Introduces Virtual Asset User Protection Act for Enhanced Crypto Regulation

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South Korea has been increasingly proactive in its regulatory approach toward the cryptocurrency space. The Financial Services Commission of South Korea announced on the 7th of February that it had conducted a legislative notice on the Enforcement of the Virtual Asset User Protection Act, which will be brought into action on July 19th. 

According to the latest regulations starting in the year’s second half, market manipulation, illegal trading, and use of undisclosed important information regarding virtual assets will be entirely prohibited. 

If the authorities find the amount of unfair profits from illegal trading to be more than 5 billion won, the law can impose a maximum sentence of life imprisonment.

In compliance with the laws results in a year in prison to lifelong imprisonment

What about the perpetrators who violate the law? To them is a serious criminal punishment. It may include imprisonment for more than one year. If not imprisoned, the criminals will be put on heavy fines between three to five times the illegal profits. 

But if the amount of unfair profits is very large like more than 5 billion won, a maximum sentence of life imprisonment can be imposed and a fine equivalent to twice the amount of unfair profits can also be imposed.

All the deposits and withdrawals are to be made through banks

The proposed regulations require business owners to store a minimum of 80% of customers’ deposits in cold wallets. Cold wallets are not consistently connected to the internet and are thus considered more resistant to cyber threats. This measure offers extra enhanced security to user’s digital assets.

Expanding on the details, business owners of crypto exchanges must manage deposits left by users to buy and sell virtual assets through banks.

Insurance mandated by law in case of cyber thefts

To compensate for the losses incurred from incidents like hacking or computer failures, the firms are obliged to subscribe to insurance policies. If not the insurance the firm may have a deduction with a compensation limit of more than 5% of the current value of crypto, 

All businesses falling under this category are obliged to comply with the act. In case a violation of the law is discovered, the Financial Services Commission may take measures such as suspending business, ordering correction, filing a complaint or notifying the investigative agency against the owners.

These proposed regulations signify a communal effort by South Korea to strike a balance between fostering innovation in the digital asset space and user safety. It also safeguards the interests of consumers and protects their crypto assets with assurance from the exchanges and crypto firms.