South Korean Regulator Requires Interest on Crypto Deposits
The Financial Services Commission (FSC) of South Korea has announced new regulations that will require investors in digital assets to receive interest on their deposits into cryptocurrency exchanges by July 2024. However, the guidance specified that nonfungible tokens (NFTs) and central bank digital currencies (CBDCs) are exempt from this requirement.
Exceptions for NFTs Functioning as Payment Method
While NFTs are generally excluded, there may be exceptions. If the tokens are categorized as NFTs but function as a payment method and are issued in large quantities, they may be included in the virtual asset classification and eligible for interest when deposited into exchanges.
User Deposit Handling and Security Measures
The FSC has also outlined guidelines for virtual asset operators regarding user deposits. Exchanges must separate user deposits and their own assets, entrusting them to a bank. Additionally, 80% of the coins must be stored in a cold wallet to enhance security measures.
Requirements for Cybersecurity and Blocking Restrictions
The regulatory guidance includes provisions for preparing against hacks or other computer incidents. Virtual asset service providers are required to obtain insurance or accumulate reserves. Furthermore, blocking deposits or withdrawals is prohibited unless deemed absolutely necessary by courts or financial regulators.
South Korea Strengthening Crypto Regulations
South Korea has been tightening its regulations on the cryptocurrency space. In December, financial regulators urged users to report unlicensed crypto exchanges operating within the country. The initiative was overseen by the Digital Asset Exchange Association and the Financial Intelligence Unit of South Korea.
Hot Take: South Korea Implements Interest Requirement for Crypto Deposits
The Financial Services Commission of South Korea has introduced new regulations that will mandate cryptocurrency exchanges to provide interest on user deposits by July 2024. This move aims to protect investors and enhance transparency in the digital asset market. While nonfungible tokens (NFTs) and central bank digital currencies (CBDCs) are exempt from this requirement, there may be exceptions for NFTs functioning as a payment method and issued in large quantities. The FSC also emphasizes the need for secure handling of user deposits and tight cybersecurity measures. These developments demonstrate South Korea’s commitment to strengthening regulations in the crypto industry.
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