South Korea’s new rules to protect users’ crypto assets took effect on July 19. These regulations, introduced by the country’s financial watchdog, aim to ensure safer handling of digital currencies by virtual asset service providers (VASPs).
The “Virtual Asset User Protection Act” requires virtual asset service providers (VASPs) to follow new steps to keep users’ crypto safe, according to a July 17 statement from South Korea’s Financial Services Commission (FSC).
South Korea’s Financial Services Commission stated that the laws will take effect from July 19. Source: FSC
Key Requirements Under South Korea’s Virtual Asset User Protection Act
Under South Korea’s new Virtual Asset User Protection Act, virtual asset service providers (VASPs) must follow several key measures to protect user crypto assets. These include:
- Insurance and Separation: VASPs must secure insurance to cover hacking and malicious attacks. They are also required to keep customer crypto assets separate from the exchange’s own assets and ensure that customer deposits are safely held in banks.
- Anti-Money Laundering Measures: VASPs must implement due diligence to prevent money laundering on their platforms. They are also obligated to report any suspicious transactions to the Financial Supervisory Service (FSS).
- Surveillance and Reporting: VASPs need to maintain a surveillance system for monitoring suspicious transactions and must promptly report any suspicious trading activities to the FSS.
- Penalties for Unfair Trading: Those involved in unfair trading activities, after investigations by financial and investigative authorities, may face criminal penalties or fines.
Concerns and Actions Related to South Korea’s New Crypto Regulations
Crypto exchanges in South Korea have expressed worries that the new regulations might lead to a significant number of tokens being delisted. To address this, a group of 20 South Korean exchanges will review 1,333 cryptocurrencies over the next six months as part of the new user protection laws. According to the Digital Asset Exchange Alliance (DAXA), this process makes a mass delisting of tokens all at once unlikely.
In a related development, South Korea’s ruling party, the People’s Power Party, has proposed delaying the implementation of the country’s tax on crypto trading profits. On July 12, the party submitted the proposal, citing deteriorating sentiment toward crypto assets and arguing that imposing taxes on virtual assets at this time would not be advisable.
Important:Â Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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