South Korea Proposes Rules to Protect Crypto Users
The Financial Services Commission (FSC) of South Korea has released suggested rules to safeguard digital asset customers under the Virtual Asset User Protection Act. The proposed regulations aim to oversee virtual asset service providers (VASPs) and protect crypto users from financial risks.
One key provision in the act requires VASPs, including crypto exchanges, to store 80% or more of their customers’ digital assets in cold wallets. Cold wallets, which are not connected to the internet, offer better security compared to hot wallets.
The FSC’s proposal also clarifies that non-fungible tokens (NFTs) and central bank digital currencies (CBDCs) are not covered by the proposed laws. The public has until January 22 to provide feedback on the rules, which will be implemented on July 19 next year.
South Korean Efforts to Regulate Cryptocurrencies
The FSC’s proposal is part of South Korea’s ongoing efforts to regulate cryptocurrencies and establish a comprehensive framework for service providers. In July 2023, the country launched a dedicated unit to investigate crypto-related crimes and protect digital asset users.
The FSC has also conducted monitoring exercises on over-the-counter (OTC) trading desks and encouraged citizens to report unregistered crypto exchanges. Additionally, compliant platforms with bank-issued real-name accounts must reserve 30% of their daily average deposits or a minimum of 3 billion South Korean won ($2.26 billion), as per a rule that took effect in September 2023.
Hot Take: South Korea Takes Steps Towards Crypto Regulation
South Korea is making significant progress in regulating cryptocurrencies and protecting users. The recently proposed rules by the Financial Services Commission aim to oversee virtual asset service providers and enhance the security of digital assets.
By requiring VASPs to store a majority of customer funds in cold wallets, the FSC is prioritizing the safety of crypto holdings. This move aligns with South Korea’s commitment to establishing a comprehensive framework for the crypto industry.
With ongoing efforts to combat illicit schemes and monitor trading desks, South Korea is demonstrating its determination to create a safe and transparent crypto ecosystem. These initiatives contribute to building trust among investors and promoting responsible use of digital assets in the country.
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