Korea's Act on the Protection of Virtual Asset Users to Take Effect from 7/19: "those who are found to have engaged in unfair trading activities may be subject to criminal punishment or penalty surcharge."

Korea's new Act on the Protection of Virtual Asset Users comes into force on July 19, 2024, marking a significant step in safeguarding users and regulating virtual asset service providers (VASPs). This follows a revision in March 2021, which required VASPs to register with financial authorities and introduced anti-money laundering measures.

The new Act addresses previous regulatory gaps by focusing on user protection and curbing unfair trading practices such as price manipulation.

"those who are found to have engaged in unfair trading activities may be subject to criminal punishment or penalty surcharge."

Key provisions include:

• VASPs must safely keep customer deposits in banks and pay interest on them. They are also required to segregate users' virtual assets from their own and ensure they have the actual types and volumes of assets claimed. Additionally, VASPs must be insured against hacking and network malfunctions or set aside a reserve fund.
• VASPs must maintain surveillance systems for suspicious transactions and report them to the Financial Supervisory Service (FSS). Those found engaging in unfair trading activities may face criminal charges or fines.
• Financial authorities, including the FSS and the Financial Services Commission (FSC), are empowered to supervise, inspect, and sanction VASPs. This includes the authority to issue corrective orders, suspend operations, and impose administrative fines.

The notice calls out, that in preparation for the Act's implementation, financial authorities have developed detailed regulations and conducted readiness tests. The FSC has provided a roadmap and on-site consultations for VASPs, while the FSS launched a pilot test in June. An industry-wide self-regulatory initiative, led by the Digital Asset Exchange Alliance (DAXA) and 20 exchange service providers, has also established compliance guidelines.

The FSC anticipates that the Act will enhance user protection and promote a fairer virtual asset market by imposing stringent penalties on unfair trading practices. Ongoing cooperation with investigative authorities will ensure effective enforcement of the new regulations.

"As it becomes possible to bring severe penalties against those engaging in unfair trading activities, it is also expected to help establish a sound order in the virtual asset market."

Related Materials:

• New Enforcement Decree on the Protection of Virtual Asset Users Approved by the Government
• FSC to Ensure Thorough Preparation for the Enforcement of the Act on the Protection of Virtual Asset Users
• FSC Proposes Rules on the Protection of Virtual Asset Users
• Government to Ensure Virtual Asset User Protection, Transaction Transparency and Market Discipline

TLDRS:

• Korea's new Act on the Protection of Virtual Asset Users will take effect on July 19, 2024, aiming to safeguard users and regulate virtual asset service providers (VASPs).
• The new legislation addresses regulatory gaps by focusing on user protection and curbing unfair trading practices like price manipulation.
• VASPs must keep customer deposits in banks, pay interest on them, segregate users' virtual assets from their own, and ensure they possess the claimed assets.
• VASPs are required to maintain surveillance systems for suspicious transactions and report them to the Financial Supervisory Service (FSS). Those found engaging in unfair trading may face criminal charges and fines.
• Financial authorities, including the FSS and the Financial Services Commission (FSC), have the power to supervise, inspect, and sanction VASPs, including issuing corrective orders, suspending operations, and imposing administrative fines.
• The FSC expects the Act to enhance user protection and promote a fairer virtual asset market by imposing stringent penalties on unfair trading practices, with ongoing cooperation with investigative authorities ensuring effective enforcement.
• Sure is interesting timing for TSO's (including GameStop) to be popping back up as well!