On June 30, South Korea‘s National Assembly passed the Virtual Asset User Protection Act to protect the rights of crypto investors, as per the official website. This is the first step taken by the country to establish a legal framework specifically for digital assets.
The crypto bill consists of 19 proposals from lawmakers, which will take effect next year. South Korean virtual asset service providers must comply with new rules to protect clients’ money and investments.
The act mandates crypto providers to provide insurance, store a portion of users’ funds in offline cold wallets to protect against system failures or hacks, and keep detailed records of all transactions.
Moreover, the Act mentions the penalties for price manipulation, illicit or unfair trading practices, making false advertisements about cryptocurrency, and not giving important information to investors, as per the SBS Biz report.
Those found guilty must pay three to five times their income from illegal work in fines or spend at least one year in prison.
This bill empowers the Financial Services Commission to monitor and inspect crypto operators and asset custodians. Moreover, the Bank of Korea can obtain data from service providers.
Lee Suh Ryoung, Korea Blockchain Enterprise Promotion Association’s chief secretary general, stated:
“We welcome the authorities’ attempt to build order. But the law in general remains stuck in the perspective of traditional finance in terms of regulating crypto.”
South Korea’s Crypto Industry Is Improving
In 2020, South Korea was one of the top countries with a bustling cryptocurrency economy, ranking seventh in the Global Crypto Adoption Index by Chainalysis.
But last year, South Korea’s position on the index fell to number 23. This happened in the same year when the collapse of Terra-Luna resulted in a massive loss of nearly $40 billion to investors in the country. Do Kwon, founder of stablecoin TerraUSD and sister token Luna, faced charges of violating the country’s capital market law.
Authorities in Montenegro imprisoned Do Kwon for four months. South Korean prosecutors recently declared Terra’s token collapse as the biggest financial fraud case ever in the country. Terra-Luna’s failure significantly impacted the creation of new laws in South Korea regarding crypto.