South Korea is one of the world's largest markets for digital currency trading and is known as a "heaven for cryptocurrency speculation." But its upcoming new regulations are causing great turmoil.
On July 19, 2024, South Korea will implement the Virtual Asset User Protection Act, which defines the definition of virtual assets and the excluded objects of virtual assets, and stipulates the obligations of virtual asset operators to safely store and manage user deposits and virtual assets. The main goal is to strengthen the supervision of cryptocurrency exchanges, protect the rights and interests of investors, and establish a healthy market order.
Main contents of the new law
Strengthen exchange supervision: All cryptocurrency exchanges must register with financial regulators and obtain business licenses, otherwise they will face closure. Exchanges must comply with statutory minimum capital and security measures requirements and undergo regular audits.
Protect user assets: Exchanges must separate user assets from their own assets, set up independent accounts, and prevent misappropriation of user funds. At the same time, exchanges need to purchase insurance to deal with risks such as hacker attacks and system failures.
Anti-money laundering and anti-crime: Exchanges need to strengthen customer identification, transaction monitoring, and proactively report suspicious transactions. Exchanges are obliged to cooperate with investigations of suspected money laundering, tax evasion and other criminal activities.
Token cleanup and rectification: Exchanges must regularly review their own trading pairs. For tokens with problems, exchanges have the right to restrict trading or even delist them.
User protection mechanism: Establish a special user complaint and dispute mediation agency to provide relief channels for victimized users.
The most powerful protection for users is that when a virtual asset company goes bankrupt or its industrial and commercial registration is deregistered, the bank as the management agency will announce the deposit payment time and place in newspapers and websites, receive the user's deposit information, and after confirmation by the virtual asset operator, directly pay the deposit to the user.
As soon as the news of the new law came out, the Korean cryptocurrency market was in turmoil. Take Bithumb, the largest exchange, for example. The exchange urgently revised its user terms of use and expanded its rights to delist tokens. Industry insiders predict that under the impetus of the new law, the Korean cryptocurrency market will undergo a round of "reshuffle". Some exchanges with weaker strength and poorer governance may exit the market, while those with strong compliance awareness and standardized operations will stand out.
However, this change in the pattern of "the strong will always be strong" will further increase the concentration of the Korean cryptocurrency market. According to analysis by industry insiders, the Korean cryptocurrency market may be dominated by a few large exchanges in the future, and the days of small and medium-sized exchanges will become more difficult.
In addition, some Korean exchanges are gradually delisting a large number of tokens to avoid regulatory risks in advance. At the same time, many cryptocurrency project owners are also feeling tremendous pressure. Some project owners even proactively apply to exchanges for delisting to avoid the passive delisting affecting the user experience. This has ultimately led to the saying of "token delisting tide" within the industry.
This kind of "cleansing" regulation is indeed worrying. After all, once a token is delisted, investors will not be able to trade and may face huge losses. But in the long run, this cleanup is necessary to help improve the overall quality and security of the Korean cryptocurrency market.
It is worth mentioning that some investors are worried that the new law may bring side effects. While the security of funds is guaranteed, the transaction costs and thresholds will also increase. In order to comply with the requirements of the new law, exchanges may increase transaction fees, which will inevitably affect the trading experience of ordinary investors. The truth about this will be revealed after the new law takes effect in South Korea.
Overall, South Korea’s new cryptocurrency law has brought about huge changes to this “cryptocurrency paradise” and deserves close attention. It not only affects Asia’s fourth-largest economy, but may also have a profound impact on the global cryptocurrency market landscape.
As a "cryptocurrency trading powerhouse", South Korea's change in regulatory attitude deserves the attention of the global crypto industry. Other countries and regions may refer to South Korea's practices and formulate stricter cryptocurrency regulatory policies. Although this is a major challenge for the entire industry, it is also an important opportunity to emphasize inclusion, innovation and regulation. It can be seen that cryptocurrency is moving towards a more compliant and healthy era.
