South Korea’s National Assembly Approves “Virtual Asset User Protection Act”

Mandatory new investor protection measures

On June 30, the South Korean National Assembly approved the “Virtual Asset User Protection Act” as a legal framework specializing in crypto assets (virtual currencies). It will be forwarded to the government and is expected to come into force within a year.

The law penalizes fraudulent practices such as cryptocurrency trading and requires service providers to comply with specific requirements to protect the interests of investors.

The contents mainly include the following items.

• To protect user assets, stipulate matters related to deposit protection, virtual currency storage, insurance, and virtual currency transaction record storage.
• It stipulates market manipulation and fraudulent transactions, and stipulates compensation for damages.
• Stipulates matters related to the supervision of financial authorities over virtual currency operators
• Provides punishments and fines for fraudulent transactions and law violators
• The Bank of Korea (central bank) stipulates the right to request data from cryptocurrency companies when necessary for policy

One of the central figures in the bill is Hwang Seok-jin, a member of the virtual assets special committee of the ruling People’s Power Party.

Seokjin said the bill would establish legal rights for cryptocurrency users and create a safer and more reliable marketplace.

Background of establishment

One of the reasons behind the establishment of the “Virtual Currency User Protection Act” is the collapse of the former Terra ecosystem in 2022 and the collapse of the major exchange FTX. The drafters point out that the series of incidents caused a great deal of damage to virtual currency users and led to a decline in trust in the virtual currency market.

Under these circumstances, market manipulation and fraudulent transactions are prohibited for conventional financial investment products, but there is no legal system for virtual currencies, and even if damage occurs, it will be dealt with by punishing and providing relief to victims. It is said that it is a situation where there is difficulty in

For this reason, it is said that legislation centered on virtual currency user protection and illegal transaction regulation was necessary first.

He continued that despite recent moves to enact legislation on cryptocurrencies in the European Union (EU), there is still no internationally agreed standard for the cryptocurrency market or industry in general.

EU Comprehensive Cryptocurrency Regulation Draft

As stated by the draftsmen of the bill, the EU formally approved a comprehensive regulatory proposal for cryptocurrencies, dubbed MiCA, in June.

Of these, provisions related to stablecoin reserves and risk disclosure will go into effect from July 2024, and most of the other provisions are not expected to come into effect until January 2025.

In addition, European Central Bank President Christine Lagarde has said that in the future, MiCA will need to be expanded to include staking, lending, and DeFi regulation.

connection: EU officially approves comprehensive cryptocurrency regulation draft MiCA, to enter into force in stages

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