South Korea's 'Virtual Asset User Protection Act' is officially implemented! A one-year grace period is provided

This site (120BTc.coM): The "Virtual Asset User Protection Law" was officially approved on July 18, 2024, and a one-year grace period was provided to improve and implement the regulatory details and ensure that the changes are well prepared fully prepare.

Main regulations for exchanges: 80% of assets exist in cold wallets

The "Virtual Asset User Protection Act" imposes strict requirements on digital asset exchanges to enhance the security and reliability of their operations. One of the main stipulations is that service providers must keep at least 80% of users’ cryptocurrency deposits in cold wallets, separate from their working capital, designed to protect user assets from potential exchange failures or mismanagement.

Fiat currencies are stored in local banks, and virtual currency assets and liabilities are consistent

Exchanges must also entrust user cash deposits to licensed local banks to ensure a higher level of trust and security. Additionally, they must maintain cryptocurrency reserves equal to and of the same type as customer deposits. This requirement is intended to ensure that exchanges can meet withdrawal demands during periods of high volatility.

Must have insurance, build reserves

In order to deal with potential hacking attacks or liquidity crises, cryptocurrency services in South Korea are now required to participate in appropriate insurance plans or build reserve funds. This additional layer of protection is designed to provide a financial buffer in the event of emergencies, further protecting user investments.

Trading needs to prosecute illegal trading activities

In addition to financial protection, the new law also requires exchanges to implement real-time monitoring systems. These systems are responsible for detecting and reporting unusual trading activity that may indicate illegal conduct. The law aims to curb market manipulation and ensure a fair trading environment.

Non-compliance will result in suspension

Exchanges that fail to comply with these new regulations will face severe penalties, including the possible suspension of their services by South Korea’s top financial regulator, the Financial Services Commission (FSC).

Korean Financial Services Bureau 24-hour monitoring

In order to strengthen the new regulatory framework, the FSC has cooperated with local exchanges to launch a 24-hour monitoring network that will continuously screen suspicious activities in the cryptocurrency market, aiming to promptly detect and prevent Fraud.

The future path of South Korea’s encryption legislation

The president of the Korean Fintech Association expressed optimism about the new regulatory system. He pointed out that this would help South Korea’s regulatory solutions expand globally, but the law needs to evolve more quickly, and South Korea still does not have legislation for virtual asset issuance.

The original virtual assets law was part of a two-stage legislative process. Lawmakers are now debating elements of subsequent regulations. Key topics discussed include regulating token issuers, the possible lifting of the ban on institutional investment in cryptocurrencies, and stablecoin regulations. South Korea is actively creating a comprehensive and flexible regulatory environment.

Strong Market for South Korean Cryptocurrency Market

South Korea has one of the largest cryptocurrency markets in the world. According to data from Kaiko, in the first quarter of 2024, the South Korean won was the most frequently used fiat currency in cryptocurrency transactions, surpassing the US dollar. This highlights South Korea’s important role in the global cryptocurrency ecosystem and highlights the importance of its regulatory progress.

The survey results of the domestic cryptocurrency market in the second half of 2023 released by the South Korean Financial Services Commission (FSC) show that transaction users are very large and growing rapidly, with an increase of 390,000 from the first half to the second half of 2023, reaching 6.45 million. If the population of South Korea is 50 million, it accounts for 12.9%.

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