In a significant move to bolster investor protection, South Korea’s National Assembly recently approved the Virtual Asset User Protection Act, the country’s first legal framework devoted to digital assets. The legislation, an amalgamation of 19 proposals from lawmakers, is expected to come into effect in one year, according to the Assembly’s official website.
The South Korean government’s initiative is led by a bipartisan group of lawmakers, reflecting the country’s broad commitment to regulating the burgeoning crypto industry. The legislation aims to define digital assets, impose penalties for unfair practices, and ensure that service providers meet specific requirements designed to safeguard investors’ interests.
The evolving crypto landscape
South Korea has been working towards creating a safer and more reliable market for cryptocurrencies, particularly after Terra’s $40 billion collapse in 2022 led to massive losses for hundreds of thousands of investors. This new legislation indicates a significant step in that direction, establishing legal rights for virtual asset users and requiring crypto service providers to protect user assets and deposits. Additionally, these providers must maintain insurance, hold a portion of reserves in offline cold wallets in case of hacks or system failures, and keep records of all transactions.
Among the key figures in this endeavor is Hwang Suk-jin, a member of the Ruling People Power Party’s Digital Asset Special Committee. Hwang has expressed optimism about the initiative, stating that the proposed bill will establish the legal rights for virtual asset users and create a safer and more reliable market for cryptocurrencies.
The Financial Services Commission has been granted the authority to oversee and inspect service providers, ensuring compliance with the new regulations, while the Bank of Korea will have the right to request data from these entities, reflecting the cryptocurrency market’s significant potential impact on financial and monetary stability.
South Korea has consistently aimed to become a leader in the digital economy. With this new legislation, the country is taking concrete steps to regulate the crypto industry, focusing first on investor protection and likely moving towards rules for local companies in token issuance and information disclosure in the future. These developments underscore South Korea’s commitment to fostering an environment for digital asset innovation and improvements.
With the passage of the Virtual Asset User Protection Act, South Korea aims to capitalize on the opportunities presented by the crypto industry, utilizing its status as one of the most active cryptocurrency economies in the world and as an increasingly important market for digital assets. The work of the lawmakers in the upcoming year is anticipated to be crucial in shaping South Korea’s role in the evolving crypto landscape.
Editor’s note: This article was written by an nft now staff member in collaboration with OpenAI’s GPT-4.