- The South Korean National Assembly has approved the Virtual Asset User Protection Act, which signifies the country’s first stride towards forming a legal structure for virtual assets.
- The law, set to come into effect next year, encompasses 19 proposals and mandates certain requirements for service providers, including segregating user assets, maintaining insurance, holding reserves in cold wallets, and keeping transaction records.
In a pivotal move, South Korea’s National Assembly passed the Virtual Asset User Protection Act last Friday. This milestone marks the country’s first approach towards crafting a legal infrastructure for digital assets. This legislation, slated to become effective next year, integrates 19 proposals put forth by lawmakers, underscoring the nation’s commitment to regulate the digital asset landscape.
New Regulatory Measures
The new legislation clearly defines digital assets and lays down penalties for unfair transactions. Under the stipulated guidelines, service providers are required to segregate user assets, procure insurance, hold a portion of reserves in cold wallets – offline storage for cryptocurrencies to mitigate the risk of hacking – and maintain comprehensive records of all transactions.
This legislative move endows the Financial Services Commission with the authority to oversee and inspect service providers. Further, it grants the Bank of Korea the power to demand data from these providers, providing an additional layer of regulation and oversight.
Reacting to Past Events
The passing of the Virtual Asset User Protection Act comes as a response to the heightened scrutiny virtual assets have been subjected to in South Korea. A contributing factor to this has been the investigation into a domestic lawmaker’s cryptocurrency holdings. This spotlight on virtual assets was further intensified by last year’s collapse of Terraform Labs.
These events underscore the need for a regulated and secure digital asset environment. The newly passed legislation is a significant stride towards this objective, offering a legal framework for crypto asset management, thereby increasing user protection and fostering the growth of a more secure and regulated digital asset landscape.