South Korea Passes New Cryptocurrency Legislation Focusing on Investor Protection

The legislation combines 19 different cryptocurrency-related acts with the aim of establishing a regulatory framework for the industry and defining digital assets that are securities.

South Korea’s National Assembly passed the “Virtual Asset User Protection Act” at its plenary session on June 30, local media outlet SBS reported.

The legislation combines 19 different cryptocurrency-related acts with the aim of establishing a regulatory framework for the industry and defining digital assets that are securities.

However, it has largely focused on investor protection amid a slew of crypto-related scandals in the country over the past year.

NEW RULE

These acts establish rules related to the prevention and punishment of illegal financial activities, market manipulation and insider trading using non-public information.

According to regulations, offenders will face a fine of more than twice the profit from unfair trade practices and at least one year in prison.

The legislation also sets out rules to bring crypto-related companies under the purview of financial services regulation by stipulating minimum capital requirements in the form of reserves, insurance of customer deposits and keeping records of all virtual assets held in their custody.

Additionally, the legislation empowers the country’s Financial Services Commission and Central Bank to monitor and investigate crypto platforms and companies.

Lee Suh Ryoung, chief secretary general of the Korea Blockchain Business Promotion Association, told reporters that the new rules are a step in the right direction, but applying rules set by traditional finance to digital assets is not the right approach.

scandal

The new rules are expected to quell some of the public backlash the government has faced since the collapse of Terra LUNA, which prosecutors say is the largest ever financial fraud case in the country.

South Korea has faced multiple scandals involving cryptocurrencies, further exacerbating the need for strict rules in the industry.

In May, South Korean prosecutors indicted Coinone executives on charges including market manipulation and paying to list tokens.

That same month, prosecutors launched an investigation into the cryptocurrency holdings of a prominent lawmaker for alleged conflicts of interest and uncovered a large amount of the now-delisted cryptocurrency called WEMIX.

The official worked on a bill related to the repeal of the virtual asset tax. The investigation is not over yet.