Regulation
South Korea Tackles New Cryptocurrency Rules: What to Expect
South Korea will see its one-year grace period for the Virtual Asset User Protection Act come to an end this month. With the end of this window period, two major developments are set to change cryptocurrency regulations as citizens in the country know them.
With the country tightening regulations this month, the cryptocurrency market recovery could slow due to reduced trading volumes.
Changes in cryptocurrency regulation: new laws In South Korea
South Korean lawmakers passed the Virtual Asset User Protection Act in July 2023, allowing for a one-year grace period before implementation. Local media reported that the legislation would be divided into two parts, the first of which was due to be submitted on July 19. The second part is still being drafted.
Under this legislation, the Financial Services Commission (FSC), South Korea’s regulatory body, and the Bank of Korea would jointly supervise cryptocurrency operators and asset custodians in the country. According to a official statement from the FSC, the aim is to prevent illicit market activities.
Cryptocurrency exchanges should also safeguard at least 80% of deposits in cold storage and subscribe to insurance programs. These measures will ensure the safety of user funds, with the ability to compensate in the event of safety violations.
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As the one-year window expires this month, South Korea is meeting the deadline for that grace period with a new technology. In an announcement Thursday, the Financial Supervisory Service of South Korea (Cyber Security Service) said it would launch a 24-hour surveillance system for local exchanges on July 19. The implementation will happen when the Virtual Asset User Protection Act is enacted.
The Financial Supervisory Service (FSS) has developed a standardized reporting format through benchmarking the Korea Exchange. This system analyzes data submitted by local exchanges, identifying and removing irregularities from transaction reports.
“We compared the criteria of KRX (Korea Exchange) in extracting anomalous transactions and prepared models and metric indicators through several simulations, which we expect will meticulously filter out anomalous transactions,” it said in a statement. excerpt from a press release shared on Thursday.
In particular, the FSS relies on the help of exchanges, which will monitor suspicious transactions and detect illegalities. There is also a hotline between local exchanges and the FSS to report violations.
Implications for Cryptocurrencies as exchanges surge
Meanwhile, exchanges are stepping up their activities to beat the July 19 window. Bithumb, the second largest exchange in South Korealaunched the ICP Korean Won trading market on June 12. Others are re-evaluating over 1,000 tokens previously listed, with the Digital Asset Exchange Alliance (DAXA) inform local users of plans to join 20 other local exchanges to review 1,333 tokens.
DAXA is an alliance representing five major Korean cryptocurrency exchanges. This will help prevent a potential delisting once the Virtual Asset User Protection Act axe falls.
These regulatory adjustments were born out of the EarthUSD and Moon saga in 2022, which centered on South Korean national politics. Make Known.
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AS Cryptocurrency markets continue to bleedsome say that the tightening regulations in South Korea could delay the price recovery. Speculation stems from the Korean won’s position versus the U.S. dollar (USD) as the most commonly used currency for cryptocurrency trading.
While this competition solidifies South Korea’s position in the global cryptocurrency arena, it qualifies as a factor in the market’s long-awaited recovery as the country’s regulatory climate heats up. As traders and exchanges grapple with this development, trading volumes are expected to decline, especially among major trading platforms, making the market more susceptible to sharp price movements and a surge volatility.
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