Enforcement Decree for Crypto Protection Act Underway in South Korea

• South Korea moves to implement an enforcement decree for crypto user protection.
• The enforcement regulations specify that 80% of users’ crypto must be in cold storage. 
• The preliminary notice of legislation will last until January 2024, with the law taking effect in July 2024.

The South Korean government has taken a decisive step towards safeguarding virtual asset users and ensuring a secure trading environment in the crypto market. Under the Financial Services Commission, South Korea has moved to implement the Enforcement Decree of the Act on protecting virtual asset users alongside the accompanying supervisory regulations. 

The Enforcement Decree is based on the “Virtual Asset User Protection Act,” promulgated in July. Per the official communication, the enactment process, including the enforcement ordinance, entered a preliminary notice of legislation starting Monday, December 11. This will last until Monday, January 22, next year. 

Furthermore, the South Korean government noted that following this period, the regulations will become binding on July 19, 2024. It is worth mentioning that the enforcement decree will take effect after undergoing review by the Ministry of Government Legislation and resolution by the Vice Ministers’ Meeting and the Cabinet of Ministers.

During the legislative notice period, the Financial Services Commission plans to solicit opinions from relevant ministries, experts, and industry stakeholders to enhance the contents of the enforcement ordinance and regulations. 

Notably, the Virtual Asset User Protection Act mandates that a certain percentage of a user’s virtual assets must be stored in a cold wallet. The enforcement ordinance and regulations specify this ratio as 80% of the economic value of the user’s virtual assets.

Meanwhile, it was highlighted that the arbitrary blocking of users’ virtual asset deposits and withdrawals is generally prohibited, except in cases where such actions are permitted. Additionally, the regulations set standards for insurance, mutual aid subscriptions, or reserve accumulation.

Also, the Financial Services Commission stated that the “Virtual Asset Investigation Business Regulations (VAIBR)” will be implemented in line with the enforcement timeline of July 2024. Notably, VAIBR outlines procedures for investigating unfair trade practices, standards for imposing fines, and other related matters.