South Korea implements legal framework to protect crypto community
South Korea has implemented the much-talked-about “Virtual Asset User Protection Act,” which outlines the do’s and don’ts for crypto businesses looking to offer their services in the country. This legal framework is aimed at monitoring and ultimately curbing the use of crypto assets for illicit activities such as money laundering and terrorist financing. The South Korean government appears to have mirrored the laws implemented by other regions, including India and the EU, but has also listed a number of new preventive measures aimed at the crypto sector.
What’s New in South Korea’s Crypto Laws?
As part of this new legislation, Seoul has ordered all virtual asset service providers (VASPs) to protect user deposits by keeping them in banks and making interest payments to depositors. In light of increasing hacking attacks on crypto exchanges and cases of fund mismanagement, Seoul has ordered VASPs to keep their operating funds completely separate from user funds.
The Asian country’s authorities have divided crypto oversight between two bodies: the Financial Supervisory Service (FSS) and the Financial Services Commission (FSC).
The FSS is responsible for ensuring that all VASPs comply with the laws set out for crypto businesses. However, the FSC is tasked with prosecuting offenders, taking corrective action and imposing administrative decisions.
India still does not have a specific government agency to oversee the crypto sector. Normally, the Ministry of Finance and the RBI work together on crypto-related policy work and decisions, but neither of them is officially responsible for the crypto sector.
Which laws are similar?
South Korea has made it mandatory for crypto-related companies to register with its financial regulators. In India too, all crypto companies must register with the Financial Intelligence Unit (FIU).
Crypto exchanges have also been asked to identify and report suspicious transactions to financial authorities to mitigate any financial risks in a timely manner. These laws are also consistent with the European Union’s MiCA laws.
Like India, South Korea is focused on ensuring that crypto tokens listed on exchanges in the country are safe and secure. Seoul has had exchanges review all crypto tokens to see if they are all legit and compliant. In India, the crypto industry has implemented self-regulatory laws around reviewing crypto tokens at regular intervals.
“The financial authorities intend to continue to strive for stronger cooperation with investigative authorities and actively seek improvements to ensure the new law is effectively implemented. The guidelines suggest the minimum level of compliance standards required for all virtual asset exchange service providers and recommend that VASPs provide essential information to their users,” the FSC of South Korea’s press release said.
