South Korea implements new crypto regulations, details here

South Korea’s new regulations enhance user protection in the cryptocurrency industry.
VASPs must keep 80% of user crypto deposits in cold storage.

As a seasoned researcher with extensive experience in the fintech and blockchain industry, I am thrilled to see South Korea take significant strides towards enhancing user protection within its dynamic cryptocurrency landscape. The recent regulations introduced by the Financial Services Commission (FSC) are a testament to the nation’s commitment to ensuring a secure environment for individuals engaging with virtual asset service providers (VASPs).

South Korea is known for having one of the most vibrant cryptocurrency markets globally, a position it intends to preserve through the implementation of fresh regulatory measures.

What is the new regulation all about?

On the 19th of July, I closely monitored the news as South Korea’s Financial Services Commission finally took action to enhance user protection when dealing with Virtual Asset Service Providers (VASPs).

As a security analyst, I would rephrase it this way: I advocate for regulations designed to bolster the safety of individuals transacting in and holding cryptocurrencies. These measures aim to fortify our national crypto ecosystem, ensuring a secure environment for all users.

In more detail, the Financial Services Commission (FSC) of South Korea disclosed the essential elements of the Virtual Asset User Protection Act through a press release. The act emphasizes:

Based on my extensive experience in the financial sector and having witnessed numerous instances of market manipulation and investor protection issues in traditional financial markets, I strongly believe that clear regulations are essential to safeguard users’ deposits and virtual assets in the rapidly evolving digital asset space. Moreover, it is crucial to address unfair trading activities such as price manipulation that can negatively impact unsuspecting investors.

Furthermore, under the latest regulations, Virtual Asset Service Providers (VASPs) are obligated to put in place safeguards for their users’ cryptocurrency. Some of these protective measures include procuring insurance coverage against cyber intrusions and maintaining a clear distinction between clients’ digital assets and the VASP’s own holdings.

VASPs also need to ensure that customer deposits are securely stored in banks.

Regarding the same topic, Kim Hyoung-joong, head of the Korean Fintech Society, shared his thoughts with The Block.

In simpler terms, Korea enforces a firm distinction between the creation and sale of digital assets, and their subsequent dissemination.

He further added,

“The Virtual Asset User Protection Act sets rules for how virtual assets are distributed. But currently, there isn’t any legislation in place that governs the creation and issue of these assets.”

In his remarks, he underscored the importance of regulating the issuance and distribution processes in the local cryptocurrency sector, while also implementing initiatives that foster industry expansion.

The story so far…

To summarize, the Virtual Asset User Protection Act, which went into effect on July 18th, establishes a strong system to ensure the security of cryptocurrency users in South Korea.

Under this new legislation, digital asset exchanges will face more stringent regulations, effective one year after its passing. Key requirements include keeping no less than 80% of customer cryptocurrency holdings in offline cold storage, ensuring they remain distinct from the exchange’s operational funds.

Considering South Korea’s significant role in the global cryptocurrency scene, the enactment of this legislation holds great importance.

2024-07-21 09:11

What is the new regulation all about?

The story so far…

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