Regulation
South Korean Cryptocurrency Firms Now Required to Monitor and Report Suspicious Transactions – DL News
- New rules require digital asset firms to safeguard clients’ assets.
- Retail demand for cryptocurrencies is growing rapidly in South Korea.
- South Korean cryptocurrency companies are regulated just like traditional companies.
Over the past year, South Korea has kept in place a law designed to protect the assets of cryptocurrency users.
Now the law has finally come into force.
South Korean regulators on Friday issued new rules to safeguard users’ deposits and virtual assets and curb unfair trading practices, such as price manipulation.
Cryptocurrency companies must now monitor and report suspicious transactions.
The law also gives financial regulators the authority to supervise, inspect and sanction virtual asset trading platforms.
“As it becomes possible to impose severe sanctions against those who engage in unfair trading activities, it is also expected that this will help establish a healthy order in the virtual assets market,” the Financial Services Commission said in a declaration on Thursday.
Main hub
South Korea, a major cryptocurrency trading hub, has tightened its regulatory framework after the collapse of Terraform Labs’ TerraUSD stablecoin, which caused losses of $60 billion in 2022. About 200,000 people in the country have invested in Terra.
But despite the fallout and calls for greater scrutiny of the country’s cryptocurrency sector, it hasn’t hurt retail. request for trading.
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In the first quarter of this year, the Korean won supported cryptocurrency trading volume of $456 billion, compared to $455 billion traded using the U.S. dollar.
Key aspects of the new regulations include obligations for virtual asset service providers to securely store customer deposits with banks.
Virtual asset service providers, or VASPs, must segregate users’ virtual assets from their own and maintain insurance or reserve funds to cover liabilities resulting from cyberattacks or network failures.
VASPs are also required to maintain surveillance systems for suspicious transactions and report such activities to the Financial Supervision Service.
This type of requirement has long been common in traditional finance.
Duties of protection
The law empowers financial authorities to supervise, inspect and sanction VASPs. Regulators can inspect VASPs for compliance with user protection obligations, and the FSC can impose sanctions on those who break the rules.
Other cryptocurrency regulation proposals in South Korea have been delayed. Last week, lawmakers from the ruling People Power Party proposed to delay a 20% tax on profits from cryptocurrency trading until 2028.
The tax would apply to annual earnings above 2.5 million won ($1,800). The threshold for earnings from stock trading is 50 million won ($36,000).
Callan Quinn is DL News Hong Kong Correspondent. Have a suggestion? Contact her at callan@dlnews.com.