South Korea passes crypto bill for investor protection.
South Korea has implemented the first independent bill for digital assets in order to enhance investor protection in the region. This development comes after the Terra ecosystem’s major collapse last year, which caused a $2 trillion crypto market downturn.
On Friday, the South Korean parliament passed the Virtual Asset User Protection legislation, which encompasses a total of 19 crypto bills. The legislation provides clear definitions for digital assets and establishes penalties for various violations, including the use of nonpublic information, market manipulation, and unfair trading practices.
According to the legislation, the Financial Services Commission (FSC), the top financial regulator, will have the authority to oversee crypto operators and custodians. The Bank of Korea will also be able to investigate such platforms. Additionally, the act will require reserve funds, insurance coverage, and other necessary record-keeping. While the rule will cover digital assets like Bitcoin, tokens considered securities will still be subject to existing capital-market laws.
Individuals who violate the new rules may face a minimum of one year in prison or significant fines. For instance, the Financial Services Commission can impose fines that are double the amount of profits obtained through unfair trading practices.
Reforming South Korea’s Crypto Industry
Last year, the collapse of Terraform Labs resulted in the loss of $40 billion in investors’ wealth. Terra founder Do Kwon is currently facing legal consequences in Montenegro.
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In addition to the Terra incident, investors were reminded of the ongoing risks in the digital asset sector when two South Korean crypto lenders temporarily halted withdrawals in June.
In March, a high-profile murder case in Seoul associated with losses in crypto investments emphasized the need for politicians to expedite the implementation of new regulations. Commenting on this development, Lee Suh Ryoung, the chief secretary general of the Korea Blockchain Enterprise Promotion Association in Seoul, stated:
“We welcome the authorities’ efforts to establish order. However, the overall law still approaches crypto regulation from the perspective of traditional finance.”
In April, South Korea experienced a significant decline in monthly spot crypto trading volume, dropping to around $38 billion compared to its peak of nearly $200 billion two years ago, as reported by CCData. Nevertheless, the country remains known for occasional virtual asset frenzies.
Countries around the world are intensifying their efforts to regulate digital assets. Locations like Hong Kong and Dubai are striving to attract crypto investments, while the European Union recently passed its groundbreaking Markets in Cryptoassets (MiCA) regulation. US agencies have also taken action in response to various incidents, including the FTX exchange’s bankruptcy.