Regulation
South Korea implements new cryptocurrency regulations, details here
- New South Korean regulations strengthen user protections in the cryptocurrency sector.
- VASPs must keep 80% of users’ crypto deposits in cold storage.
South Korea has one of the fastest growing cryptocurrency industries in the world, a status it aims to maintain with the recent introduction of new regulations.
What does the new regulation consist of?
On July 19, South Korea’s financial security regulator implemented long-awaited measures to protect users interacting with virtual asset service providers (VASPs).
These regulations aim to strengthen protections for people who purchase and store crypto assets, ensuring that the country’s crypto landscape remains secure.
To go further, a Press release The Financial Services Commission of South Korea (FSC) introduced the main provisions of the Virtual Asset User Protection Act and noted:
“This Act contains provisions (a) protecting users’ deposits and virtual assets, (b) regulating unfair business activities, such as price manipulation, (c) authorizing financial regulators to supervise, inspect and sanction VASPs, and to investigate and take appropriate action against those who engage in unfair business activities.”
Additionally, the new rules require virtual asset service providers (VASPs) to implement several measures to protect users’ cryptocurrencies. These measures include purchasing insurance against hacking and malicious attacks, and segregating customers’ crypto assets from the exchange’s own assets.
VASPs must also ensure that customer deposits are stored securely in banks.
Kim Hyoung-joong, chairman of 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.”
He stressed here that for the local crypto industry to grow, there is a need to regulate both issuance and distribution, as well as measures to promote the growth of the industry.
The story so far…
In conclusion, the Virtual Asset User Protection Act, officially approved on July 18, provides a solid framework to protect cryptocurrency users in South Korea.
With a one-year grace period to iron out regulatory details, the law will impose stricter requirements on digital asset exchanges, including a requirement to keep at least 80% of users’ crypto deposits in cold storage, separate from the exchanges’ own funds.
Given that South Korea is one of the largest cryptocurrency markets in the world, this legislation is certainly crucial.