South Korea updates its Virtual Asset Users Protection Act

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The government of South Korea has decided to update its Virtual Asset Users Protection Act to protect investors from market crimes.

 

South Korea’s financial regulator, the Financial Services Commission, has announced a new law that prohibits the use of ‘undisclosed important information’ about crypto, market manipulation and illegal trading. The new law includes several criminal punishment measures and fines applicable for violations, such as fixed-term imprisonment of more than one year or an acceptable fine of three to five times the number of illegal profits.

Moreover, according to the FSC, criminals who make more than KRW 5 billion (USD 3.8 million) from illegal crypto trading schemes could face actual life sentences. The Virtual Asset User Protection Act is expected to come into force on 19 July 2024 following a bill enactment on 18 July 2023.

Representatives from the FSC highlighted that the law also mentions and reinforces the FSC’s authority to supervise and inspect virtual asset business operators and to investigate and take action on unfair trading practices. The FSC also brought up its ability to supervise whether virtual asset business operators comply with the Virtual Asset User Protection Act and inspect their business and status.

 

The government of South Korea has decided to update its Virtual Asset Users Protection Act to protect investors from market crimes.

 

The origins of this law 

The Virtual Asset Users Protection Act was passed by lawmakers in South Korea in June 2023 as a response to what happened to Terraform Labs and its South Korean founder, Do Kwon. According to cointelegraph.com, Kwon is currently facing extradition to the United States, rather than South Korea, where he faces eight charges, including commodities fraud, securities fraud, wire fraud and conspiracy to defraud and engage in market manipulation.

In essence, the Virtual Asset Users Protection Act aims to combat illicit market acts, such as using undisclosed information for crypto investments, manipulating market prices and engaging in fraudulent transactions. TheBlock.co reveals that the act also requires cryptocurrency service providers to safeguard over 80% of deposits in cold storage to protect user funds and enrol in insurance programmes for potential user compensation in the event of security breaches.

The law is part of South Korea’s two-part legislation that aims to establish a regulatory framework for the crypto industry. The second half of the regulation focuses on standardising crypto token issuance and information disclosure for investors.

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