South Korea's FSC Mandates Interest on Crypto Deposits by 2024, Outlines Security Protocols
Summary:
South Korea's Financial Services Commission (FSC) has announced that all digital asset investors should earn interest on their deposits at exchanges by July 2024. However, nonfungible tokens (NFTs) and central bank digital currencies are exempted from this rule, except in certain circumstances. The FSC also detailed the process for handling user deposits at exchanges. Furthermore, guidelines were provided on protecting against and addressing cyber-attacks. This comes as part of South Korea's attempt to tighten control over the crypto industry.
The Financial Services Commission (FSC) in South Korea has announced that, by July 2024, cryptocurrency investors should earn interest when they deposit their digital assets into an exchange. The FSC's instruction however states that this rule will not apply to nonfungible tokens (NFTs) and digital currencies issued by central banks. These details were relayed through local media channels on December 10, indicating that the FSC plans to roll out this legislative guidance. Although NFTs are not included, exceptions can be made. If tokens are identified as NFTs but are issued in large amounts and can be used for payments, they could still fall under the virtual asset classification. As a result, these tokens may be eligible to earn interest when placed into exchanges. The FSC also included a process for dealing with user deposits for virtual asset brokers in their guidance. This involves the requirement for exchanges to segregate user deposits and their own holdings, entrusting them to banks, and storing 80% of the coins in a secure offline storage, or "cold wallet". The guidance includes protocols to prevent or respond to cyber attacks, advising virtual asset service providers to either acquire insurance or set funds aside for such eventualities. The regulator has ruled against blocking deposits or withdrawals except in cases of absolute necessity or under orders from court or financial regulators. The South Korean authorities have been strengthening their control on the digital currency industry, with financial regulators recently urging users to report any unlicensed cryptocurrency exchanges operating within their jurisdiction. The enforcement campaign was jointly run by the Digital Asset Exchange Association (DAXA) and the South Korean Financial Intelligence Unit.
Published At
12/11/2023 11:14:50 AM
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