South Korea is becoming increasingly proactive in its regulatory approach to the crypto sector. The Korean Financial Services Commission announced on February 7th that it has issued a legislative notice regarding the enforcement of the Virtual Asset User Protection Act, which will come into effect on July 19th.
According to the latest regulations from the second half of this year, market manipulation, illegal transactions, and use of non-public material information regarding virtual assets will be completely prohibited.
If authorities determine that the amount of ill-gotten gains from illegal transactions is 5 billion won or more, the person could be sentenced to up to life in prison.
According to the law, the sentence ranges from one year to life in prison.
What happens to perpetrators who violate the law? They face serious criminal penalties. It may include imprisonment for one year or more. If not imprisoned, the offender will be subject to a heavy fine ranging from three times his illegal profits to five times his.
However, if the amount of unjust enrichment is large, such as 5 billion won or more, the maximum penalty is life imprisonment and a fine equal to twice the amount of unjust enrichment.
All deposits and withdrawals are made through your bank
The proposed regulation would require business owners to store at least 80% of customer deposits in cold wallets. Cold wallets are considered more resistant to cyber threats because they are not constantly connected to the internet. This measure further strengthens the security of users' digital assets.
To expand on the details, crypto exchange business owners need to manage the deposits left by users to buy and sell crypto assets through their banks.
Insurance required by law in case of cyber theft
Businesses are required to carry insurance to cover losses caused by accidents such as hacking or computer failure. If uninsured, the company is entitled to a deduction with an indemnity limit of more than 5% of the current value of the virtual currency.
All companies in this category are obliged to comply with this law. If a violation of laws and regulations is discovered, the Financial Services Commission may take measures against the owner, such as suspending operations, ordering corrections, filing a complaint, or reporting the owner to an investigative agency.
These proposed regulations represent a concerted effort by South Korea to balance the promotion of innovation in the field of digital assets with the safety of users. It also protects consumer interests and secures crypto assets with guarantees from exchanges and cryptocurrency companies.
