The Financial Services Commission (FSC) of South Korea has unveiled a set of proposed rules aimed at bolstering consumer protection within the rapidly evolving virtual asset sector. The regulatory initiative is in accordance with the recently passed Virtual Asset User Protection Act, slated to be enforced starting July 19, 2024.
Under the provisions of the Act, the FSC is now accepting public comments on the proposed rules until January 22, 2024. The legislation marks a significant stride in South Korea’s ongoing efforts to bring greater transparency and oversight to the burgeoning cryptocurrency industry.
The Virtual Asset User Protection Act delineates digital assets and establishes legal grounds for punitive measures, including criminal penalties and fines, designed to combat unfair trading activities involving virtual assets. Notably, the legislation mandates that Virtual Asset Service Providers (VASPs) or exchanges actively monitor transactions for abnormalities and promptly report such instances to the FSC.
In a bid to fortify consumer confidence and ensure responsible financial practices, the proposed rules stipulate that VASPs must remunerate customers for the use of their deposits. When these exchanges opt to store assets in traditional banks, the banks are permitted to invest the deposits in secure assets such as government bonds.
Furthermore, the proposed regulations require VASPs to store a minimum of 80% of customers’ deposits in cold wallets. Cold wallets, which are not consistently connected to the internet, are considered more resilient against cyber threats, offering enhanced security to users’ digital assets.
South Korea has been increasingly proactive in its regulatory approach toward the cryptocurrency space. In July of this year, the FSC had introduced draft rules mandating companies to disclose their ownership or holdings of cryptocurrencies, a measure set to take effect in the coming year.
These proposed regulations signify a conscientious effort by South Korea to strike a balance between fostering innovation in the digital asset space and safeguarding the interests of consumers.
Source: Coin Desk