- South Korea’s Virtual Asset User Protection Act is set to take effect from today, 19th July.
- The new regulations now legally obligated exchanges to store at least 80% of user deposits in cold storage.
When it comes to crypto, South Korea has a vibrant ecosystem. In fact, the country has one of the largest cryptocurrency markets globally.
According to a report, the South Korean Won (KRW) was the top fiat currency traded with cryptocurrencies in Q1 of 2024. A better macroeconomic climate and intense competition among Korean exchanges have increased trading volumes in Korean markets, reaching their highest level in over two years in early March.
However, the nation lacked clear regulations, to date, leaving loopholes for unfair trading practices.
“The regulatory framework centered on anti-money laundering was not adequate for authorities to actively respond to various types of unfair trading activities, such as price manipulation, and for guaranteeing safe protection of users’ assets,” reads the official press release of the Financial Services Commission (FSC).
But the FSC has worked for the last five months to realize the much-anticipated Virtual Asset User Protection Act (VAUPA), which is set to take effect on 19th July.
According to FSC, this act contains provisions protecting users’ deposits and virtual assets, regulating unfair trading activities, such as price manipulation, authorizing financial regulators to supervise, inspect, and sanction VASPs, and investigating and taking appropriate actions against those engaging in unfair trading activities.
To be more detailed, the new regulations mandate stricter custody protocols for cryptocurrency exchanges. Exchanges are now legally obligated to store at least 80% of user deposits in cold storage. Additionally, user fiat deposits must be held in licensed banks, further segregating them from exchange funds.
Edited by Harshajit Sarmah
