{"id":2203826,"date":"2024-02-14T16:39:18","date_gmt":"2024-02-14T07:39:18","guid":{"rendered":"https:\/\/koreapro.org\/?p=2203826"},"modified":"2024-02-14T16:39:18","modified_gmt":"2024-02-14T07:39:18","slug":"new-legislation-to-protect-cryptocurrency-exchange-users-faces-mixed-reactions","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2024\/02\/new-legislation-to-protect-cryptocurrency-exchange-users-faces-mixed-reactions\/","title":{"rendered":"New legislation to protect cryptocurrency exchange users faces mixed reactions"},"content":{"rendered":"
South Korea’s Financial Services Commission (FSC) <\/span>introduced<\/span><\/a> new legislation last week to bolster state-led oversight of the local cryptocurrency sector and enhance user protection despite <\/span>concerns<\/span><\/a> among industry leaders.<\/span><\/p>\n While South Korea’s burgeoning cryptocurrency market attracts <\/span>increasing<\/span><\/a> interest from global blockchain enterprises, recent high-profile incidents such as the <\/span>collapse<\/span><\/a> of Terra \u2014 a South Korean-led blockchain platform \u2014 point to the continued lack of centralized measures to safeguard the users’ assets.\u00a0<\/span><\/p>\n The South Korean government\u2019s <\/span>pledge<\/span><\/a> to improve its regulatory framework by enacting the <\/span>Act on the Protection of Virtual Asset Users<\/span><\/a> is, in part, a response to such concerns.\u00a0<\/span><\/p>\n However, experts told <\/span>Korea Pro<\/span><\/i> that the country\u2019s new legal measure comes with a significant risk, contradicting the fundamental allure of the cryptocurrency market \u2014 decentralization.\u00a0\u00a0\u00a0<\/span><\/p>\n THE NEW LAW<\/b><\/p>\n Scheduled to take effect from <\/span>July 19<\/span><\/a>, after being passed by the National Assembly last June, the primary aim of the <\/span>Act on the Protection of Virtual Asset Users<\/span><\/a> is to oversee and protect participants in the burgeoning virtual assets market.<\/span><\/p>\n The law’s core objective is to protect individuals engaged in various activities within this domain, including trading, exchanging, transferring, storing, or managing virtual assets. Essentially, it serves as a regulatory framework designed to uphold the integrity of cryptocurrency transactions while prioritizing the security of users\u2019 assets.\u00a0<\/span><\/p>\n Under the legislation, virtual assets are defined as \u201celectronic proofs\u201d \u2014 assets that possess economic value and are tradable or transferable electronically. The law also delineates entities excluded from virtual assets, such as in-game currencies, and imposes obligations on virtual asset service providers (VASPs) to manage users’ deposits and assets securely.\u00a0<\/span><\/p>\n In particular, regulations mandate that a significant portion of user assets must be stored in secure offline storage \u2014 known as cold wallets \u2014 to mitigate the risk of hacking and security breaches.\u00a0<\/span><\/p>\n It also establishes criteria for insurance coverage or reserve fund accumulation to address risks stemming from hacking or system failures, stating that companies must have insurance or reserves to compensate users. The amount of insurance coverage required depends on the value of assets the company holds.<\/span><\/p>\n To address issues concerning the disclosure of vital information, insider trading, and the blocking of user assets, the legislation prohibits unjustifiable blocking of user deposits and assets, mandating crypto exchanges monitor abnormal transactions and impose severe fines for unfair trading practices.\u00a0\u00a0\u00a0<\/span><\/p>\n Oh-hoon Kwon, a representative attorney at Cha & Kwon, told <\/span>Korea Pro <\/span><\/i>that the new act will still apply to fraudulent activities overseas if their effects are felt domestically.\u00a0<\/span><\/p>\n \u201cThis means that foreign VASPs conducting business targeting Korea are also subject to this act,\u201d Kwon said.\u00a0<\/span><\/p>\n The new legislation follows the implementation of a similar law on regulating uniformity for crypto-assets in the European Union, enacted <\/span>last June<\/span><\/a>.<\/span><\/p>\n However, Kwon noted to <\/span>Korea Pro<\/span><\/i> that Seoul\u2019s new law on crypto exchanges differs from the EU\u2019s <\/span>Markets in Crypto-Assets Regulations (MiCA)<\/span><\/a> law in that MiCA has a broader target scope, regulating various aspects of crypto-assets across different operational domains while Seoul\u2019s new legislation is more narrowly tailored, specifically targeting activities within virtual asset exchanges.\u00a0<\/span><\/p>\n