Originally published on: July 20, 2024
In a move aimed at enhancing consumer protection in the cryptocurrency sphere, South Korea’s financial security regulator has rolled out stringent regulations impacting virtual asset service providers (VASPs) as of July 19.
**Enhanced Protection for Crypto Users**
Under the newly enacted “Virtual Asset User Protection Act,” VASPs are mandated to undertake several measures to safeguard users’ crypto holdings, as outlined in a communication by the South Korea Financial Services Commission (FSC) issued on July 17.
**Key Requirements for VASPs**
Among the key provisions are the obligation for VASPs to secure insurance against cyber attacks targeting users’ crypto assets, maintain a clear demarcation between customer holdings and exchange assets, and ensure that customer deposits are securely held in banks.
Additionally, VASPs are required to adhere to stringent due diligence practices to curb money laundering activities on their platforms and promptly report any suspicious transactions to regulatory authorities.
**Enforcement and Consequences**
The statement issued stated, “VASPs are expected to maintain constant vigilance over suspicious transactions and immediately alert the Financial Supervisory Service (FSS) about any potentially illicit trading activities.” Violators, following investigations by relevant authorities, may face severe penalties or criminal sanctions for engaging in unfair trading practices.
**Impact on Crypto Exchanges**
Despite concerns expressed by crypto exchanges in South Korea, the regulations are not projected to result in a mass delisting of tokens simultaneously as initially feared. A group of 20 South Korean exchanges is set to conduct a comprehensive review of 1,333 cryptocurrencies over the course of the next six months to comply with the new laws, thereby minimizing the likelihood of a broad-based delisting process.
**Recent Developments in South Korea’s Crypto Landscape**
In a related development, South Korea’s ruling People’s Power Party has officially recommended a postponement of the implementation of the nation’s tax on cryptocurrency trading profits. The proposal emphasized the need for a more measured approach in light of the evolving sentiment towards crypto assets.
**Conclusion:**
In summary, the implementation of more stringent regulations in South Korea’s crypto exchange sector signifies a crucial step towards enhancing user protection and ensuring the integrity of digital asset transactions within the country’s borders. By prioritizing cybersecurity and adherence to anti-money laundering protocols, the government aims to foster a more secure and transparent crypto ecosystem that inspires confidence among market participants.
