Regulation
South Korea Implements New Cryptocurrency Regulations, Details Here
- New South Korean regulations improve user protection in cryptocurrency industry.
- VASPs must keep 80% of users’ cryptocurrency holdings in cold storage.
South Korea boasts one of the most dynamic cryptocurrency sectors in the world, a status it intends to maintain with the recent introduction of new regulations.
What does the new regulation consist of?
On July 19, South Korea’s financial securities regulator implemented long-awaited measures to safeguard users interacting with virtual asset service providers (VASPs).
These regulations were designed to improve the protection of individuals who purchase and store cryptocurrencies, ensuring the safety of the national cryptocurrency landscape.
Digging deeper into this, a Press release The Financial Services Commission (FSC) of South Korea outlined the key provisions of the Virtual Asset User Protection Act and noted,
“This Act contains provisions (a) aimed at protecting users’ virtual deposits and assets, (b) aimed at regulating unfair trading activities, such as price manipulation, (c) aimed at empowering financial regulatory bodies to supervise, inspect and sanction VASPs and to investigate and take appropriate measures against those who engage 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 customer cryptocurrencies separate from exchange assets.
VASPs must also ensure that customer deposits are held securely at banks.
Commenting on the same, Kim Hyoung-joong, president 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 that regulates the issuance of virtual assets.”
Here he stressed that for the local cryptocurrency industry to grow, regulation of both issuance and distribution is needed, along with measures to promote the growth of the sector.
The story so far away…
In conclusion, the Virtual Asset User Protection Act, officially passed on July 18, provides a strong regulatory framework to protect cryptocurrency users in South Korea.
With a one-year grace period to iron out regulatory details, this law will impose stricter requirements on digital asset exchanges, including a requirement to keep at least 80% of users’ cryptocurrency holdings in cold storage, separate from the exchanges’ own funds.
Considering that South Korea is one of the largest cryptocurrency markets in the world, this legislation is certainly crucial.