South Korea passes a New Policy to Secure Crypto Activities
- The new policy demands that virtual asset providers in South Korea keep detailed information, take responsibility for user deposits, and provide insurance.
- Non-compliance with the new legislation could result in a jail term of one year or incur heavy fines.
- South Korean regulators have worked to set up policies to prevent a collapse similar to the Terra ecosystem’s failure in 2022.
The South Korean government has passed a new cryptocurrency law in an effort to safeguard cryptocurrency investors against a collapse and prevent situations like that of Do Kwon’s Terra. The country’s National Assembly approved the Virtual Asset User Protection Policy on Friday, June 30. Local sources claim that the move will protect crypto investors in South Korea by regulating unethical business activities.
The policy combines 19 crypto-related bills, creating a uniform bill that defines digital assets and imposes fines for illegal trading actions such as exploiting confidential information, manipulating the market, and other unlawful conduct.
South Korean regulators are keen on making digital activities safe and have proposed different measures to achieve this. One such measure demands that virtual asset service providers (VASPs) shoulder responsibility for users’ deposits and provide insurance. These precautions are required to guarantee user security against hacking, computer malfunctions, and other threats.
Local reports revealed that companies or individuals who violate the new measures could face at least one year in prison or a significant fine. In addition, the Financial Services Commission now has the power to regulate cryptocurrency operators and asset custodians in compliance with the new law.
Furthermore, the Bank of Korea would have the authority to investigate virtual asset providers as part of the country’s move to increase financial accountability and transparency.
Interestingly, key players in the South Korean crypto space have mixed views about the new legislation. Lee Suh Ryoung, chief secretary general of the Korea Blockchain Enterprise Promotion Association said the new policy is an attempt by the government to restore order.
However, Ryoung believes that traditional finance plays a huge role in South Korea’s crypto regulation policy and that the crypto industry might be suppressed rather than promoted.
The new law comes days after Do Kwon, the founder of the doomed Terra ecosystem, was jailed for four months in Montenegro for attempting to travel using a fake passport. It has been over a year since the collapse of Kwon’s TerraUSD and Luna wiped off at least $40 billion of customers’ funds.
South Korean prosecutor Dan Sunghan recently described the Terra situation as “the largest financial fraud or financial securities fraud case that has ever happened in South Korea.” Both US and South Korean prosecutors are seeking to extradite Do Kwon.
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