- Today marked the implementation of South Korea’s first crypto regulatory framework, which places a high priority on investor protection.
- It is now mandatory for local cryptocurrency exchanges to store at least 80% of user deposits in cold wallets.
The first crypto regulatory framework in South Korea is now fully operational. The new regulations, which were expedited in response to the catastrophic collapse of FTX and Terra-Luna in 2022, are centered on providing safety nets for cryptocurrency investors.
On July 18, 2024, the Virtual Asset User Protection Act was formally enacted. Following this, a year-long grace period was granted to improve the regulations’ specifics.
More stringent regulations are applied to digital asset exchanges by the act. South Korean service providers are now required by law to store at least 80% of user cryptocurrency deposits in cold storage, apart from their own money.
Exchanges must also hold cryptocurrency reserves that are equivalent in quantity and kind to customer deposits, and they must assign the custody of user cash deposits to a local bank with a license. In addition, Korean crypto services must now set up a reserve fund or enroll in sufficient insurance to guard against hacking and liquidity issues.
In addition to safeguarding user cash, the act requires exchanges to implement real-time monitoring systems to flag unusual trading activity that may be unlawful. The Financial Services Commission (FSC), which is the nation’s primary financial regulator, may impose fines or suspend services for companies that fail to comply with the new regulations.
Along with the new regulation, the FSC also recently revealed a 24-hour monitoring network with local exchanges that would monitor the bitcoin market for any questionable activities.
The new law created a legislative framework that would pave the way for regional blockchain solutions to become global. He did, however, make the point that the law has to be expanded beyond its existing parameters.
Korea has a policy that clearly distinguishes between the distribution and the issuing of virtual assets. Distribution is regulated by the Virtual Asset User Protection Act. Nevertheless, there is currently no legislation governing the issuing of virtual assets.
The head of the think tank continued by saying that while strict regulation is necessary, policymakers are also failing to consider ways to encourage the expansion of the regional cryptocurrency market.
Legislators are now debating what should be included in the follow-up regulation for South Korea’s virtual asset law, which was originally intended to be a two-part statute. Among the subjects being assessed are stablecoin laws, token issuer regulation, and the reexamination of the prohibition on institutional investment in cryptocurrencies.
One of the biggest cryptocurrency markets in the world is located in this nation. According to Kaiko statistics, the Korean won surpassed the US dollar as the most popular fiat currency for cryptocurrency trading in the first quarter of 2024.
Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
