In a significant move to ensure the safety and security of users in the virtual asset and cryptocurrency market, the South Korean government has taken decisive steps to implement the Enforcement Decree of the Act on protecting virtual asset users.
The Financial Services Commission is spearheading this initiative alongside accompanying supervisory regulations. This move comes as a response to growing concerns surrounding the virtual asset sector’s transparency and safety.
Enforcement Decree of Virtual Asset User Protection Act
The Enforcement Decree of the Virtual Asset User Protection Act, which was promulgated in July, has entered a preliminary notice of legislation phase starting from Monday, December 11, 2023. This preliminary notice period will extend until Monday, January 22, 2024.
Following this phase, the regulations are set to become legally binding on July 19, 2024, after undergoing review by the Ministry of Government Legislation, resolution by the Vice Ministers’ Meeting, and approval by the Cabinet of Ministers.
During the legislative notice period, the Financial Services Commission is actively seeking input from relevant ministries, industry experts, and stakeholders to improve the content of the enforcement ordinance and regulations. This collaborative approach aims to address concerns and ensure that the virtual asset market operates in a secure and transparent manner.
Key provisions of the Virtual Asset User Protection Act
One of the crucial provisions of the Virtual Asset User Protection Act is the requirement that a certain percentage of a user’s virtual assets must be stored in a cold wallet. The enforcement ordinance and regulations specify this ratio as 80% of the economic value of the user’s virtual assets. This measure is designed to enhance the security of digital assets and reduce the risk of unauthorized access or theft.
The Act also addresses the issue of arbitrary blocking of users’ virtual asset deposits and withdrawals, generally prohibiting such actions unless specific circumstances warrant it. These regulations aim to provide users with more certainty and security when dealing with virtual assets.
The newly introduced regulations also establish standards for insurance, mutual aid subscriptions, and reserve accumulation within the virtual asset sector. These measures are intended to create a safety net for users and ensure that they are protected in case of unexpected events or losses in the virtual asset market.
Virtual Asset investigation business regulations
In addition to the above provisions, the Financial Services Commission has announced that the “Virtual Asset Investigation Business Regulations (VAIBR)” will be implemented in alignment with the enforcement timeline set for July 2024.
VAIBR outlines procedures for investigating unfair trade practices, sets standards for imposing fines, and addresses other related matters. This regulation is crucial for maintaining market integrity and ensuring fair practices within the virtual asset sector.
The South Korean government’s proactive measures to implement and enforce regulations governing the virtual asset market represent a significant step towards creating a safer and more transparent trading environment. These actions are in response to the evolving nature of the cryptocurrency and virtual asset landscape, where user protection and security are paramount.
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