Cryptocurrency exchanges are one of the most important institutions in the whole industry, acting as a site for billions of dollars in transactions and as a gauge for the state of the sector. Despite their importance, they have also been a source of controversy over the years, especially when a major exchange goes under.
Luckily for crypto users in South Korea, a new layer of protection has been added that will ensure that they are not left in the dust if their exchange fails. This comes via The Financial Services Commission which passed a new bill as part of the Enforcement Decree of the Act on the Protection of Virtual Asset Users.
How Users Are Being Protected
According to this new decree, which will come into effect on July 19, 2024, Virtual Asset Service Providers (VASPs) will be more clearly defined by the law. On top of this, VASPs will be required to keep customer funds in a financial institution separate from where their own funds are held.
This is to ensure that if the institution is compromised or fails, customer funds will not be lost. It takes into account just how much crypto users rely on exchanges and how vulnerable their funds can be. Exchanges are, for starters, the platforms that investors turn to to decide what assets to invest in. As Yash Majithia writes, customers may look at the 바이낸스 상장 예정 코인 목록 to know which have potential and which they should put money in.
Even after deciding this, customers will then spend their money on these exchanges to buy the tokens and, against popular suggestions, might leave their funds on the exchange. Customers do a myriad of things with crypto, like shopping and even gambling. In the case of the latter, users either send their funds directly to the platforms’ wallet or connect to an external wallet. Consumers using an anonymous casino usually transfer their winnings to their main storage solution, which might be an exchange.
This means that if the exchange goes under, their funds could be lost as we’ve seen in the cases of FTX, QuadrigaCX, and many others.
Customer Protection Through Refunds
Another way that South Korea is working to protect customers is via a decree that will refund them if their exchange goes under. The same financial institutions where exchanges are required to store customer funds have been empowered to refund customers in this instance and must announce this on digital and traditional media.
This will help bring much more assurance to users that they will not wait years hoping to get their funds back no matter what happens to the exchange they use. The FSA has also imposed a prison sentence of at least a year in prison and fines that are up to five times the profit of those found running crypto frauds.
The increased popularity of the industry means that scammers are targeting consumers but hopefully, this law will help the situation.
