The new legislation promises to strengthen the protection of cryptocurrency investors in South Korea

This article is brief:

• The Financial Supervisory Service of Korea will implement strict supervision of virtual assets from July 2024.

• The FSS outlines rules that require exchanges to pay interest on user deposits and maintain minimum reserves.

• Insider trading rules are in place, and exchanges are obligated to monitor transactions and report unfair practices.

South Korea’s Financial Supervisory Authority (FSS) is preparing to implement strict regulations on virtual assets to strengthen investor protection.

The FSS has issued a legislative notice outlining key provisions that are expected to come into force in July 2024.

South Korea Crypto Investors

According to a recent local report, investors who participate in cryptocurrency trading will earn interest on their exchange deposits.

In addition, non-fungible tokens (NFTs) and deposit tokens pegged to central bank digital currencies (CBDCs) are not covered by the law.

At the same time, the HKMA has set out the measures for the management of user margins for virtual asset operators. Operators must keep user deposits separate from proprietary assets and keep them safe in the bank.

In addition, 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 deposited through the exchange.

The legislation is to protect South Korean cryptocurrency investors

This is to ensure that investors receive financial benefits. The move affects major players such as Upbit, which hold 90% of the market share in domestic virtual asset trading. As of September, Upbit’s user deposits reached 29 trillion won.

In addition, the legislation imposes minimum reserve requirements for virtual asset exchanges. A reserve of at least 30 billion won must be kept in case of emergency.

At the same time, this reserve must be made up of 80% coins and mandatory storage of cold wallets is mandatory. Security can be enhanced by isolating them from the internet.

However, in order to enhance their resilience against hacking attacks and technical incidents, virtual asset operators must ensure insurance coverage or establish a reserve fund.

Insider trading regulations similar to those of the traditional stock market have been introduced. 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 suspicious acts of unfair trading practices to the financial authorities.

However, the regulations also prohibit unintended interruptions to user deposits and withdrawals.