South Korea Set to Implement First Crypto Act on User Protection
South Korea will put into effect its initial crypto act centered on safeguarding users on July 19. Consequently, the South Korean financial authority has contacted nearly 30 registered exchanges to review the over 600 cryptocurrencies available for trading. Failure to comply with the new law could result in serious criminal repercussions.
Crypto Exchanges Tasked with Assessing Asset Listings
The Korea Times disclosed that registered exchanges are mandated to conduct a thorough review of the status of their listed crypto assets. Currently, these 29 exchanges in South Korea trade hundreds of different cryptocurrencies.
- The Korean Financial Intelligence Unit (FIU) data indicated that over 600 tokens were listed on crypto exchanges in South Korea in the second half of 2023.
- FIU’s report, operating under the Financial Services Commission (FSC), revealed a 3.5% decrease from the first half of 2023.
The Financial Supervisory Service (FSS) stated that all exchanges registered with the financial regulator must determine if their listed cryptocurrencies align with the watchdog’s criteria.
- Exchanges are required to review their listed tokens every six months and perform “maintenance reviews” every three months.
- Platforms like Upbit, Bithumb, Coinine, and Korbit must assess if they will continue supporting the trading of reviewed crypto assets.
As part of the fresh legislation, exchanges must establish an evaluation and decision-making unit within their organizations to evaluate the reliability of token issuers. They must also ensure that issuers meet user protection standards, technology requirements, security protocols, and regulatory compliance. Tokens that fall short of these criteria will be classified as “cautionary” assets and could face delisting.
In cases of cryptocurrencies like Bitcoin, wherein the issuer is unknown, alternative criteria will be provided for evaluation.
South Korean Authorities Prepare for New Regulatory Framework
South Korean financial authorities announced in February that the Virtual Asset User Protection Act would be enforced from July 19. The primary objective of Korea’s first Crypto Act is to protect users’ assets and prevent unfair trading practices within the country. The law also aims to grant financial regulators enhanced oversight of the industry.
- Crypto businesses are obligated to prioritize user safety and fund security to comply with the new regulations.
- Failure to adhere to the legislation could lead to criminal charges or fines for business operators.
The financial authorities are restructuring internally to develop policies regarding the crypto industry. The FSS is gearing up to monitor and investigate unfair virtual asset trading through its two newly established bureaus.
- The FSC is set to create a new bureau by the month’s end to exclusively oversee the regulatory framework of the virtual assets industry.
Hot Take: Embracing Change in the Crypto Landscape
With South Korea’s upcoming implementation of the first Crypto Act, significant adjustments are expected within the cryptocurrency industry. The focus on user protection and regulatory compliance reflects a global trend towards enhancing transparency and security in digital asset trading. As the regulatory framework evolves, market players must adapt to ensure continued operations within the new legal landscape. Stay informed and prepared to navigate the changing dynamics of the crypto sector in South Korea and beyond.
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