South Korea Advances Virtual Asset Security with Comprehensive User Protection Regulations

South Korea Advances Virtual Asset Security with Comprehensive User Protection Regulations

Crypto News – South Korea has taken a decisive step in enhancing the security and integrity of its virtual asset market with the introduction of the Virtual Asset User Protection Act. This landmark legislation, crafted by the Financial Services Commission (FSC), is set to transform the digital asset landscape when it comes into effect on July 19, 2024. Its primary objective is to create a safe and trustworthy environment for users and to instill a sense of integrity in the dealings of virtual assets.

The FSC has recently unveiled a comprehensive set of regulations under this act, encompassing the Enforcement Decree of the Virtual Asset User Protection Act and the Virtual Asset Industry Supervision Regulations. These regulations are meticulously designed to provide robust protection for users and ensure the stability of the virtual asset market.

A notable aspect of these regulations is the expansion of exemptions under the Act, which now include deposit tokens linked to Central Bank Digital Currencies (CBDC) and Non-Fungible Tokens (NFTs). This strategic move reflects the FSC’s commitment to keeping the law relevant and adaptable to the evolving virtual asset landscape.

A key feature of the regulations is the requirement for a clear separation between user deposits and proprietary assets, entrusting the management of these deposits to reputable banking institutions. This decision not only highlights the importance of public trust and financial stability but also sets out detailed protocols for the management and utilization of user deposits, placing a high priority on the protection of user assets.

In an effort to bolster security measures, the regulations stipulate that over 80% of users’ virtual assets must be stored in cold wallets, elevating the standard from the previously set 70%. This move is aimed at safeguarding user assets from various cyber threats, including hacking and crypto scams.

The regulations go further in preparing for potential crises. Virtual asset business operators are now required to have insurance or mutual aid agreements in place, or to maintain reserve funds. This proactive strategy is aimed at ensuring that operators are held accountable for incidents such as hacking or system failures, thereby reinforcing the overall strength of the virtual asset ecosystem.

To maintain the integrity of the market, the regulations also include specific guidelines for the disclosure of important, previously undisclosed information. This tailored approach is designed to reflect the unique characteristics of the virtual asset market.

Moreover, the regulations strictly prohibit virtual asset business operators from arbitrarily blocking deposits and withdrawals, barring justifiable reasons. This rule is aimed at empowering users and protecting them from unwarranted disruptions in their transactions.

Finally, to foster a vigilant and fair trading environment, virtual asset exchanges are obligated to closely monitor for any abnormal transactions and report suspected unfair trade practices promptly to regulatory authorities. This demonstrates a clear commitment to upholding market integrity and ensuring the protection of users in the virtual asset space.