South Korea’s first cryptocurrency regulatory framework is now fully effective, with a focus on investor protection, according to PANews. The new law, the Virtual Asset User Protection Act, was officially approved on July 18, 2024, and a one-year grace period was given to perfect the regulatory details.
The bill imposes stricter requirements on digital asset exchanges. South Korean crypto exchanges are now required to store at least 80% of user deposits in cold wallets, thereby isolating user deposits from the exchange's own funds.
Exchanges must also entrust user cash deposits to local licensed banks for safekeeping and hold cryptocurrency reserves of the same amount and type as customer deposits. In addition, South Korean crypto services are now required to purchase sufficient insurance or establish reserve funds to deal with hacker attacks or liquidity crises.
In addition to measures to protect user funds, the bill also requires exchanges to establish a real-time monitoring system to report abnormal trading activities that may be illegal. Companies that fail to comply with the new regulations may face penalties from South Korea's Financial Services Commission (FSC) or have their services suspended.