South Korea is set to implement robust measures to safeguard digital asset users and establish “order” in the nascent crypto market.
The country’s Financial Services Commission (FSC) has announced the upcoming enforcement of the “Virtual Asset User Protection Act” on July 19, 2024, aiming to protect users’ assets, prohibit “unfair trading practices”, and grant financial authorities the power to supervise and sanction virtual asset markets and operators.
Life Imprisonment For Crypto Violators
According to the FSC’s press release on Wednesday, virtual asset business operators will be obligated under the new legislation to securely safeguard users’ deposits and crypto assets.
To ensure the safety of users’ funds, institutions with public trust will manage the deposits, with banks designated as the managing institutions.
Interestingly, virtual asset business operators must store a certain percentage of users’ crypto assets apart from the Internet to enhance protection. The supervisory regulations set the threshold at 80% or more of the economic value of the virtual assets.
Business operators will also be held accountable for accidents such as hacking or computer failures and must meet specific standards outlined in the supervisory regulations.
The legislation also addresses prohibited activities, including using undisclosed important information regarding virtual assets, market manipulation, and illegal trading.
Violators may face criminal punishment or fines, with fixed-term imprisonment of over one year or fines equivalent to three to five times the unfair profits. In cases involving illegal profits exceeding 5 billion won ($390,000), a maximum sentence of life imprisonment may be imposed, along with fines equivalent to twice the amount of unfair profits.
Strengthening Oversight
According to the press release, to facilitate a “smooth implementation” of the Virtual Asset User Protection Act, the financial authorities are building an infrastructure for supervision, inspection, and investigation tasks.
Dedicated departments have been established within the Financial Supervisory Service, while crypto businesses will receive monthly regulatory implementation roadmaps and checklists to aid in fulfilling their obligations under the law.
Recognizing the potential “high damage” caused by illegal activities, such as unfair trading practices in the crypto market, the authorities are actively collaborating with investigative agencies to ensure strict punishments, the FSC stated.
Furthermore, the Financial Supervisory Service Reporting Center has been expanded and reorganized into the “Virtual Asset Unfair Trading and Investment Fraud Reporting Center,” enabling swift detection of illegal activities and cooperation with investigative authorities.
Ultimately, the FSC will review the feedback received during the legislative notice period for the Enforcement Decree of the Virtual Asset User Protection Act and the Virtual Asset Industry Supervision Regulations.
The final enforcement date of the Virtual Asset User Protection Act will be announced after the Ministry of Government Legislation reviews it to ensure adherence to the designated schedule.
Featured image from Shutterstock, chart from TradingView.com