This article briefly:
• The Financial Supervisory Service of South Korea will implement strict supervision on virtual assets from July 2024.
• The FSS outlines rules requiring exchanges to pay interest on user deposits and maintain minimum reserves.
• Insider trading rules are in place and exchanges are obliged to monitor trading and report unfair practices.
South Korea’s Financial Supervisory Service (FSS) is preparing to implement strict regulations on virtual assets to strengthen investor protection.
The FSS has published a legislative notice outlining the key provisions which are expected to come into force in July 2024.
South Korean Cryptocurrency Investors
According to a recent local report, investors participating in cryptocurrency trading will earn interest on their deposits on the exchange.
In addition, non-fungible tokens (NFTs) and deposit tokens pegged to central bank digital currencies (CBDCs) do not fall within the legal scope of virtual assets.
At the same time, the HKMA has stipulated user deposit management measures for virtual asset operators. Operators must separate user deposits from proprietary assets and store them safely in banks.
Furthermore, when profits are generated, they must distribute the revenue to users as fees or interest.
However, virtual asset exchanges must ensure that the banks they use pay interest on user deposits placed through the exchange.
The legislation is intended to protect South Korean cryptocurrency investors
This is to ensure that investors receive financial benefits. The move affects major players such as Upbit, which has a 90% market share in domestic virtual asset trading. Upbit's user deposits reached 29 trillion won as of September.
In addition, the legislation also imposes minimum reserve requirements on virtual asset exchanges. They must keep at least 30 billion won in reserves for emergencies.
At the same time, the reserve must consist of 80% of the coins and mandatory storage in cold wallets is enforced. Security is enhanced by isolating them from the internet.
However, in order to enhance the ability to resist hacker attacks and technological accidents, virtual asset operators must ensure insurance coverage or establish reserve funds.
Insider trading regulations similar to those in traditional stock markets are already in place. This ensures transparency and accountability in the virtual asset space.
As part of these new measures, virtual asset exchanges are obliged to closely monitor transactions and promptly report any suspicion of unfair trading practices to financial authorities.
However, regulations also prohibit unexpected disruptions to user deposits and withdrawals. #韩国 #加密立法