The actions towards crypto regulations across the countries has picked up pace in the last several years, following several large-scale instances. Regulatory and financial institutions of many countries have started pondering over the regulation of burgeoning asset classes or to put an outright ban. East Asian country, South Korea, is pushing towards regulating cryptocurrencies seeking customer protection.
First Step Towards Regulating Crypto
The National Assembly of South Korea passed the bill dubbed Virtual Asset User Protection Act on Friday, July 1, 2023. The proposal seeks the protection of investors’ interest in crypto investments. With the approval of the crypto bill, the country has taken its first step towards the formation of a legal regulatory framework for crypto assets.
Lawmakers brought in a collection of 19 proposals needing cryptocurrency service providers to adhere to several compliances, including the need to segregate the assets and deposits of users. The assets would need to be insured, and some of its part would be kept in offline cold wallet reserves. This intends to keep the funds secure in case of hacks or failing of systems, etc. Maintaining all the transaction related records was also made mandatory in the bill.
The legislation, expected to come into action within a year, also includes penalties on activities such as manipulation of asset price, misleading or false promotion of crypto assets, and lacking to provide crucial and required information about investors.
According to the South Korean crypto regulation, the accused of the aforementioned acts would be sentenced to a year of imprisonment at least, or would need to pay a fine up to three to five times of the profit amount earned in the wake of violations.
The term “virtual assets” was defined as an “electronic representation of an economic value” of an entity worthy to transfer electronically.
Under the aforementioned definition of digital assets, the legislation excluded the central bank digital currency (CBDC) project under the South Korean central bank, Bank of Korea.
Ramped Up Efforts on Crypto Regulations
Crypto regulation has turned out to be the need of the hour, especially after the mishaps escalated in the emerging financial space. One of last year’s biggest falls, Terra (LUNA) network, started a ripple effect that ended up badly impacting many cryptocurrencies and related crypto companies. South Korea also had to suffer the after effects, given its connection with the fallen blockchain network and billions of dollars worth cryptocurrency.
In the Chainalysis Global Crypto Adoption Index of 2020, South Korea was at the 7th spot in terms of the most active economies towards crypto. However, in the aftermath of the Terra network fall, it fell drastically and took the 23rd spot in the similar index by 2022.
Regulation of cryptocurrencies have accelerated across the countries, given the incidents that took place in the crypto industry, starting with Terra network and followed by Celsius, Voyager, BlockFi and with the worst hit after the FTX implosion.
Source: The Coin Republic