South Korea Unveils New Enforcement Measures for Virtual Asset Users Act, Set for July Rollout
Summary:
South Korea's government has approved an enforcement decree related to the Act on the Protection of Virtual Asset Users (PVAU), set to take effect on July 19. The Financial Services Commission (FSC) has established measures, including proactive strategies and vigilant oversight, to ensure law effectiveness. The FSC will form a committee to develop policy on regulated virtual assets. It will also endorse credible financial institutions to manage customer deposits for virtual asset service providers (VASPs). Furthermore, robust rules are established for declaring abnormal trading activities. Despite controversy around Bitcoin (BTC) exchange-traded funds (ETFs), the Enforcement Decree will be officially announced in July.
South Korea's government has greenlit an enforcement decree pertaining to the Act on the Protection of Virtual Asset Users (PVAU), the latter of which ensures user safety in dealings with virtual assets. These laws are set to take effect simultaneously on July 19. The Decree outlines the strategic measures the Financial Services Commission (FSC) would adopt to ensure the act is effective, combining proactive approaches and keen oversight on the application of the PVAU to secure user protection.
The FSC will assemble a committee consisting of government officials and private sector savvy individuals. This was done in order to devise a policy for regulated virtual assets or those virtual assets that are seen as harmless to users under laws other than PVAU. For instance, the commission will endorse credible financial institutions eligible to handle customer deposits for virtual asset service providers (VASPs). It is mandatory for customer funds to be separated from VASP funds and invested under an agreement with the VASP in “risk-free” assets to accrue income. In case of VASP deregistration or bankruptcy, the bank must return the deposited amount straight to the customer.
The amount of VASP customer virtual assets that need to be stored in cold wallets will be determined by the FSC, with the figure not dropping below 80%. Under specific conditions, VASPs may put restrictions on deposits and withdrawals. There are specific rules set in place for declaring unusual trading activities and severe punishment, even life imprisonment, is implemented for failing to follow the rules. Furthermore, there are complex rules for differentiating public from nonpublic information.
Over the past year, South Korea has notably increased enforcement activities related to cryptocurrencies. The Virtual Assets User Protection Act was enacted in July 2023, despite facing backlash for its absence of a regulatory framework.
The launch of Bitcoin (BTC) exchange-traded funds (ETFs) in the United States sparked debate in South Korea about the asset product. The local brokerages were advised by the FSC to steer clear of these US funds, a stance that drew criticism from the president's office. The party leading the new government also urged the FSC to reconsider its stance on BTC ETFs.
The Enforcement Decree will be officially announced in July.
Published At
6/26/2024 9:44:54 PM
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