- South Korea is set to enforce its inaugural crypto user protection legislation on July 19.
- The new regulation mandates a thorough review of over 600 cryptocurrencies by nearly 30 registered exchanges.
- Failing to adhere to these requirements could result in significant criminal penalties for the exchanges involved.
South Korea’s new crypto act aims to bolster user protection and enforce strict compliance on crypto exchanges, ensuring a safer and more regulated digital asset market.
Mandatory Asset Review for Crypto Exchanges
According to The Korea Times, registered exchanges are now required to review the listing status of their cryptocurrency assets meticulously. In South Korea, there are 29 operational exchanges trading hundreds of digital currencies.
New data from the Korean Financial Intelligence Unit (FIU), which falls under the Financial Services Commission (FSC), indicate that the number of tokens listed on these platforms had decreased by 3.5% during the latter half of 2023, compared to the first half. The Financial Supervisory Service (FSS) has stressed that all registered exchanges must evaluate whether their listed digital assets conform to the regulatory authority’s criteria.
Authorities have stipulated that exchanges like Upbit, Bithumb, Coinone, and Korbit should conduct these assessments biannually, with supplemental maintenance reviews every three months. These reviews will help determine if the crypto assets can continue to be traded on these platforms.
An FSS representative reiterated that exchanges are obligated to reassess their listed tokens periodically to ensure they meet regulatory standards, ensuring a more secure environment for investors and traders alike.
Evaluation Departments and Criteria
The new legislation also requires the establishment of specialized evaluation and decision-making departments within each exchange. These departments must verify the reliability of token issuers and assess whether they comply with user protection, technological, and security standards. Token issuers failing to meet these standards will see their assets labeled as “cautionary” and potentially face delisting.
The law also provides alternative criteria for cryptocurrencies like Bitcoin, which do not have a specified issuer, ensuring comprehensive regulation across all digital assets.
South Korea’s Preparations for Enhanced Regulation
Earlier this year, South Korean financial authorities announced that the Virtual Asset User Protection Act would take effect on July 19. The primary goal of this groundbreaking legislation is to protect users’ funds and combat unfair trading practices within the country’s crypto market. Moreover, it grants regulatory bodies the authority to oversee and regulate the industry more effectively.
According to reports, non-compliance with the new law could lead to severe penalties, including fines and potential criminal charges. Crypto businesses could face fines amounting to three to five times the profit gained from unfair practices or imprisonment for up to one year.
The Korea Times revealed that financial authorities are restructuring internally to better devise and implement policies related to the crypto industry. The FSS is formulating new strategies to monitor and investigate unfair virtual asset trading through its recently established bureaus.
Simultaneously, the FSC is preparing to launch a new bureau dedicated exclusively to regulating virtual asset activities, expected to be operational by the end of the month.
Conclusion
The new crypto legislation marks a significant shift in South Korea’s approach to digital asset regulation. By mandating comprehensive reviews and establishing rigorous standards, the country aims to create a safer and more transparent crypto trading environment. These measures are poised to not only protect users but also ensure the industry’s growth and stability moving forward.
