South Korea passes law to safeguard crypto investors

South Korea's National Assembly approved the Virtual Asset User Protection Act, in the country's first concrete efforts to establish a comprehensive legal framework for virtual assets.

Scheduled to take effect next year, the legislation is a culmination of 19 proposals from various lawmakers. Its primary objectives encompass defining digital assets and outlining penalties for unfair transactions. Additionally, the act mandates that service providers must safeguard user assets by segregating them, obtaining insurance coverage, holding reserves in cold wallets and maintaining meticulous transaction records.

Under the new law, the Financial Services Commission will be vested with the authority to oversee and conduct inspections on virtual asset service providers. Moreover, the Bank of Korea will be empowered to request data from these service providers as deemed necessary.

The heightened focus on virtual assets in South Korea comes in the wake of a probe into a domestic lawmaker's cryptocurrency holdings, drawing increased attention to the sector's regulation and accountability. Furthermore, the collapse of Terraform Labs last year has added to the urgency in addressing the challenges associated with the digital asset landscape.

With the Virtual Asset User Protection Act's passage, South Korea aims to address potential risks, enhance consumer protection and foster a more secure and transparent environment for users engaging with virtual assets. As the country's first significant legislative move in this realm, it lays the groundwork for further developments and regulations in the dynamic world of cryptocurrencies and digital assets.