South Korea has passed its first independent digital asset law to increase investor protection, a year after the disappearance of the tokens founded by Do Kwon and the $2 trillion cryptocurrency market exacerbated its decline.
Parliament on Friday passed the Virtual Asset User Protection legislation, which brought together 19 bills related to cryptocurrencies, after a long delay. The law defines digital assets and imposes penalties for violations such as the use of non-public information, market manipulation and unfair trading practices.
The legislation authorizes the South Korean Financial Services Commission to oversee crypto operators as well as asset custodians. The Central Bank of Korea will also be able to investigate such platforms.
The law requires insurance coverage, reserve funds, and required records to be kept. While the rules cover assets like Bitcoin, the previously existing capital market law still applies to tokens that are considered securities.
Kwon was recently sentenced to four months in Montenegro for trying to travel with a fake passport. The celebrity was wanted by South Korea and the United States after the 2022 collapse of the TerraUSD and LUNA coins wiped out at least $40 billion.
Lee Suh Ryoung, general secretary of the Korea Blockchain Enterprise Promotion Association in Seoul, said:
“We welcome the authorities' attempt to establish order. But the law is stuck in the traditional finance perspective in terms of regulating crypto in general.”
Back Hyeryun, chairman of the National Policy Committee in South Korea's parliament, said the new rule list will focus on protecting investors for now and will gradually expand to provide broader oversight.
*Not investment advice.
