- The purpose of the bill is to strengthen crypto regulation and shield investors from fraud.
- The FSC will monitor crypto operators and custodians.
In a time when the cryptocurrency sector is facing regulatory hurdles elsewhere, notably in the United States, South Korea enacted its first independent virtual asset law on Friday. The purpose of the bill is to strengthen crypto regulation and shield investors against mishaps like Terra-LUNA, which was precipitated by Terra co-founder Do Kwon.
The “Virtual Asset User Protection Act” was enacted at the June 30 plenary session of the National Assembly of South Korea. The law consolidates 19 pieces of crypto-related legislation, including definitions of digital assets, penalties for offences including insider trading and market manipulation, and expanded authority for the Financial Services Commission (FSC).
It’s the country’s first piece of domestic law protecting users of virtual assets and limiting unfair trades. The Political Affairs Committee of the Korean National Assembly approved the cryptocurrency law in May, and the Judicial Affairs Committee cleared it on June 29.
The FSC will monitor crypto operators and custodians. On the other hand, the Bank of Korea may investigate such platforms. Moreover, insurance, reserve money, and documentation are all required. Rules will apply to cryptocurrencies like Bitcoin, while the Capital Markets Act governs tokens classified as securities.
The law also aspires to provide the groundwork for sanctions and accountability for damages resulting from unfair crypto trading.
According to reports, the penalties for breaking the new regulations include mandatory minimum sentences of at least one year in jail and/or hefty fines. For gains made by unfair trading, for instance, the Financial Services Commission may levy a penalty equal to double that amount.
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