The Financial Services Commission (FSC) of South Korea announced on Monday that it has suggested regulations aimed at safeguarding virtual asset services providers’ (VASPs’) clientele.On July 19, 2024, the regulations—which are based on the Virtual Asset User Protection Act that was passed earlier this year—are supposed to go into force.Comments from the general public are welcome until January 22.The Act outlines what constitutes a digital asset and establishes legal justifications for fines and criminal penalties “to punish unfair trading activities using virtual assets.”Additionally, VASPs, or exchanges, must keep an eye on unusual transactions and notify the FSC as needed.
In recent months, South Korea’s efforts to regulate the cryptocurrency industry have increased.The FSC published draft regulations in July requiring businesses to reveal whether they possess or own cryptocurrency beginning in 2019.VASPs will have to reimburse clients for using their deposits as a result of the new regulations.Banks that receive asset storage from exchanges are permitted to use the deposits to purchase secure assets like government bonds.
In accordance with the regulations, exchanges must hold at least 80% of consumer deposits in cold wallets.A cold wallet is a cryptocurrency wallet that is less susceptible to hackers since it is not always online.
Digital currencies issued by central banks (CBDCs) and non-fungible tokens (NFTs) are not covered by the Act.