Regulation
How South Korea’s New Cryptocurrency Law Will Impact the Market and Traders
Big news from South Korea! South Korea’s first comprehensive regulatory framework for cryptocurrencies, the Virtual Asset User Protection Act (VAUPA), is now in effect. The new law aims to protect investors after the collapse of Terra-Luna and FTX. It requires local cryptocurrency exchanges to keep at least 80% of user deposits with interest rates of 1% to 1.5% in cold wallets segregated from their funds. Additionally, the law requires monitoring of abnormal trading activities.
How will this impact the cryptocurrency market and traders?
Let’s take a closer look!
What do these changes mean for the market and traders?
The groundbreaking law cracks down on unfair business practices and introduces critical user protections, marking South Korea’s first comprehensive regulation of the virtual asset sector, according to FSS press release. releaseThe law also requires exchanges to purchase insurance or establish reserve funds to prepare for computer hacks or liquidity crises.
To strengthen market integrity, exchanges must set up real-time monitoring systems to detect and report illegal trading activities. Failure to comply with these rules can result in sanctions or suspension by the Financial Services Commission (FSC), which has also launched a 24-hour monitoring network.
Kim Hyoung-joong, chairman of the Korea Fintech Society, stressed that while the law establishes a strong regulatory system, it must expand to regulate the issuance of virtual assets and promote the local crypto industry.
Future regulations
However, South Korea’s Virtual Assets Act, originally planned as a two-part legislation, is now in effect, with lawmakers discussing follow-up regulations. Topics under consideration include regulating token issuers, revising the ban on institutional cryptocurrency investments, and regulating stablecoins. South Korea is home to one of the largest cryptocurrency markets, with the Korean won set to be the most used fiat currency for cryptocurrency trading against the US dollar in the first quarter of 2024.
This decision could set a precedent globally. Traders should act wisely and do their research before investing in risky assets!