South Korea approves Virtual Asset User Protection Law 70 of exchanges to use cold wallets insider trading to be penalized
To protect cryptocurrency users, the South Korean Cabinet approved the enforcement regulations of the “Virtual Asset User Protection Law” on June 25. The regulations will come into effect on July 19, aiming to protect cryptocurrency users and establish a healthy order in the virtual asset market.
The regulations define virtual assets and list what does not belong to virtual assets. It requires virtual asset service providers (VASPs) to securely store and manage users’ fiat deposits and virtual assets. Additionally, it introduces criminal penalties and fines for unfair trading practices involving virtual assets, such as insider trading and price manipulation.
The regulations also exclude electronic bonds and gift cards under the “Electronic Financial Transactions Act,” as well as deposit tokens and non-fungible tokens (NFTs), as they are considered new digital assets with lower risk for users. Furthermore, the Financial Services Commission (FSC) will establish a virtual asset committee to provide recommendations for policies and systems of the virtual asset market and VASPs.
VASPs must deposit at least 70% of users’ virtual assets in cold storage to reduce the risk of being hacked. The FSC may set different storage ratios in case of major threats such as hacking or business closures.
The law requires VASP to continuously monitor abnormal transactions and report them to financial authorities. It also specifies the timing for information to become “public” and imposes criminal penalties and fines for unfair trading activities.
The regulations will be officially announced at the beginning of next month and implemented on July 19, along with the “Virtual Asset User Protection Law.” The FSC will also develop new regulatory guidelines for the supervision of the virtual asset industry and market operations.
The FSC emphasized that the implementation of these laws and regulations will create a basic safety net for user protection and promote a healthy market order. They assured thorough preparation to ensure smooth implementation and strengthen user protection in the virtual asset market.
