South Korea’s National Assembly has given the green light to the Virtual Asset User Protection Act, marking a significant stride towards establishing a legal structure for virtual assets. The legislation is set to come into force next year.
The act, an amalgamation of 19 proposals put forth by legislators, provides a clear definition of digital assets and outlines penalties for any unfair transactions. Service providers must now keep user assets separate, hold insurance, maintain a certain level of reserves in cold wallets, and keep a comprehensive record of all transactions.
“The bill empowers the Financial Services Commission with the authority to supervise and inspect service providers. It also grants the Bank of Korea the prerogative to demand data from these service providers,” said the legislation.
The legislation comes at a time when virtual assets are under increased scrutiny in South Korea, following an inquiry into a local lawmaker’s crypto holdings and the downfall of Terraform Labs (CRYPTO: LUNA) last year.
The reason for suggesting an alternative for the South Korean government for “Virtual asset based on blockchain technology is a new type of asset that has not existed before, and as the 2030 generation is recognized as an investment target, the virtual asset market at home and abroad is growing significantly.
However, in the case of financial investment products in accordance with the 「Financial Investment Services and Capital Markets Act, unfair trade practices such as the use of undisclosed material information, market price manipulation, and illegal transactions are prohibited, but there is no institutional mechanism for virtual assets, resulting in damages to users in this regard. Even if an incident occurs, there are difficulties in responding to it, such as punishment and damage relief,” said the legislation.
“In fact, a series of events that occurred in the virtual asset market, such as the Terra-Luna crisis and the bankruptcy of the FTX Exchange in the US, caused enormous damage to virtual asset users, which also led to a decrease in trust in the virtual asset market. On the other hand, as regulations and institutionalization movements for virtual assets are progressing in various countries around the world, laws related to virtual assets have recently been enacted in the European Union, but internationally agreed standards or standards for the virtual asset market and the overall virtual asset industry A regulatory system is absent. Therefore, foremost, legislation focusing on the protection of virtual asset users and the regulation of unfair trade practices is necessary,” stated the legislation according to the Assembly’s official website.
Edited by Eunice Anyango Oyule and Judy J. Rotich
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