- South Korea’s new regulations enhance user protection in the cryptocurrency industry.
- VASPs must keep 80% of user crypto deposits in cold storage.
South Korea boasts one of the world’s most dynamic cryptocurrency industries, a status it aims to maintain with the recent introduction of new regulations.
What is the new regulation all about?
On 19th July, South Korea’s financial security regulator implemented much-anticipated measures to safeguard users interacting with virtual asset service providers (VASPs).
These regulations are made to enhance the protection of individuals purchasing and storing crypto assets, ensuring that the nation’s crypto landscape remains secure.
Expanding on this, a press release from South Korea’s Financial Services Commission (FSC) outlined the key provisions of the Virtual Asset User Protection Act and noted,
“This Act contains provisions (a) protecting users’ deposits and virtual assets, (b) regulating unfair trading activities, such as price manipulation, (c) authorizing the financial regulators to supervise, inspect, and sanction VASPs, and to investigate and take appropriate actions against those engaging in unfair trading activities.”
Additionally, the new rules require Virtual Asset Service Providers (VASPs) to implement several measures to protect users’ cryptocurrency. These measures include obtaining insurance against hacking and malicious attacks, and keeping customers’ crypto assets separate from the exchange’s own assets.
VASPs also need to ensure that customer deposits are securely stored in banks.
Remarking on the same, Kim Hyoung-joong, president of the local think tank Korea Fintech Society, told The Block,
“Korea has a policy that strictly separates the issuance of virtual assets and the distribution of virtual assets.”
He further added,
“The Virtual Asset User Protection Act regulates distribution. However, there is no law yet to regulate the issuance of virtual assets.”
Here he emphasized that for the local crypto industry to grow, there needs to be regulation of both issuance and distribution, along with measures to promote industry growth.
The story so far…
In conclusion, the Virtual Asset User Protection Act, officially approved on 18th July, provides a robust framework aimed at safeguarding crypto users in South Korea.
With a one-year grace period for refining regulatory details, this law will impose stricter requirements on digital asset exchanges, including the mandate to keep at least 80% of user crypto deposits in cold storage, separate from the exchanges’ own funds.
Given that South Korea is one of the world’s largest cryptocurrency markets, this legislation is definitely crucial.
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